Rep. Garland Pierce
Rep. Garland Pierce said the legislature had to make the difficult decisions because of the recession.
"Due to the shortfall of revenue, I feel we did the best we could," Pierce said. "We had to make some tough decisions. The economy is just in shambles right now. Had it not been for the stimulus money, we would have really had to cut programs back."
The Wagram representative expressed reservations about cuts to mental health programs, which will necessitate the closing of some level three and four facilities.
"That raises some concerns for me because that is a population that really needs those homes to help them through that part of their life."
The three-term legislator says he was satisfied with the final school appropriations.
"I am just glad we were able to restore so much to education."
Pierce says the budget "gives flexibility the to superintendents" to make necessary decisions to operate the schools and adjust their own budgets.
He also recognized the need for several tax hikes.
"There are some tax increases. We hope the general public understands that if we continue to cut revenues,... it will decrease the quality of life"
Pierce said even with the $1 billion tax increase, the budget is still $2.5 billion smaller than last year. He attributed the loss of revenue to the difficult economy.
Sen. Bill Purcell said the extra month reflects the tough decisions lawmakers were faced with.
“It’s been this way before, but we’re talking about a large amount of money and it takes time to work out the details,” Purcell said. “What’s special about this budget is we had a shortage of funds, and the question was how do you deal with it.”
The way legislators have chosen to deal with the problem is by raising taxes by about $1 billion and making cuts across all categories of state spending.
Those cuts include $1 billion in education in funding to local school boards, and those tax increases include a one-cent sales tax hike and a surcharge on income taxes that applies to individuals who make $60,000 a year or married couples who make $100,000 a year.
The report also has tax increases coming on cigarettes and alcohol, as well as some Internet purchases.
The budget did, however, achieve two of Gov. Beverly Perdue's main objectives in avoiding across-the-board income tax increases, and across-the-board class size increases. However local governments will still have to decide how to cope with a decrease in funding in the budget.
The budget leaves it up to local school districts to decide how to handle their share of $225 million in cuts. Classes at Scotland High School starts back today.
Andy Cagle, community schools coordinator for Scotland County Schools, said tracking the state budget cuts have been an ongoing process.
"We've been in contact through with the state throughout the process," Cagle said. "We're just having to tighten our belt a little bit and streamline the things we are doing."
Cagle says the school system has largely anticipated the cuts.
"I think we are in a position where everything is covered. The education and programs offered to students are not going to suffer."
Cagle said the most noticeable change for students returning to school will likely be class sizes, though some staff positions have also been eliminated. The system has moved employees around and reassigned duties to prevent layoffs.
He said the schools would likely
"School is going to open tomorrow at Scotland High School and teachers are going to be teaching students. Regardless of what the state does, we are still going to be operating."
Purcell, co-chair of the Senate’s committees on health and human services appropriations and health care, said the $3.9 billion budget proposed for this department is $1 billion less than last year’s proposal of more than $4.9 billion.
That means a fifth of the department’s budget was lopped off.
“When you consider that $500 million of those cuts are from Medicaid, the federal money we’re going to lose is $1.5 billion because they match funds three-to-one,” Purcell explained. “So, we’re talking about $2.5 billion in services that will be taken away from the citizens of North Carolina.”
Purcell said more than 500 positions have been cut from the Health and Human Services budget, and $40 million in funding cuts have been made for mental health local management entities to pay their service providers.
He said the cuts are appropriate considering the state’s financial situation, however, pointing out that state income taxes were down 41 percent in the state this year.
“We’ve got major financial problems here even using [$1.3 billion in stimulus funding in the total budget]. Even with that money we’re still making these Draconian cuts. I don’t think people understand how major this recession really is.”
To make up for the lack of income taxes, budget cuts and tax increases were inevitable in this budget, Purcell said, as well as measures Perdue has implemented like furloughs for teachers and the use of lottery funds.
“The money just wasn’t coming in to pay the bills,” he said.
Purcell has supported reforming the state’s tax structure in the past, and said there is a provision in the budget that requires members of the finance committee to return to work on restructuring the state’s tax code.
A plan may come up in the short session or even in a special session of the General Assembly this fall, Purcell believes.
Purcell also said there was a large bipartisan meeting on the subject in Raleigh last week.
“I think it is important to restructure taxes in the state, and I believe that we will do that as soon as September,” he said. “I’m glad we’re not a California, but I think this budget is going to really make people take a look at how we bring money in and spend it.
“The fact of the matter is, when you’ve got to make these big cuts, you have to cut education and health and human services,” Purcell said at another point. “They’re both just too large a part of the budget not to be cut.”
Along with cuts to Health and Human Services, cuts to other departments will also result in job losses and the elimination of vacant positions.
The General Assembly gave the budget final legislative approval on party-line votes with Democrats voting yes and Republicans voting no. The Senate voted 27-18 and the House 66-52. Perdue said she would reluctantly sign into law the package that includes higher taxes and reduced services.
Opponents argued that with unemployment raging and some families just making ends meet, this was the worst time to raise taxes for the next two years.
"They just can't afford any more and they ask me as their representative, don't put any more on my back," said Rep. Larry Brown, R-Forsyth.
Supporters like Rep. Paul Luebke, D-Durham, countered that the Democrats who run the Legislature cut spending by about $2 billion, twice the amount of the new taxes that will maintain state services. Other spending cuts were replaced with more than $1 billion in federal stimulus funds, though that money was not included in the budget. More than 700 state employees will lose their jobs.
The budget includes temporary taxes worth $990 million. About 80 percent of that comes from increasing the sales tax rate by one penny, so that most consumers would pay 7.75 cents on each dollar they spend through mid-2011. Corporate profits would face a 3 percent surtax for two years. Cigarette taxes will rise permanently by 10 cents per pack.
Also, individuals with taxable income of at least $60,000 and couples reporting $100,000 to $250,000 would face a surtax amounting to an extra $20 for each $1,000 in tax they owe in 2009 and 2010. Couples reporting taxable income of more than that would pay $30 extra for every $1,000 they owe.
Small-business owner Dave Jackson worried that higher taxes would impede recovery from the state's worst recession in at least a generation.
"I think any increase in taxes is going to slow this process down because it's going to reduce the spendable income that individuals have," said Jackson, founder and CEO of Aimet Technologies in Zebulon, which manufactures components used in dishwashers and household electrical meters. Jackson said his company, which employs 70, has seen orders drop about 15 percent from last year.
He said he's also not happy that the profits his corporation distributes to shareholders will be taxed once at the company and again after it becomes a shareholder's income.
"I feel that the legislature stopped short of budget cuts and restructuring from what they could have," he said.
The budget cuts land heaviest on the two biggest parts of the budget: human services and schools.
Health and human services programs were given $1 billion less than the amount lawmakers appropriated last year, though much of the state cuts may be replaced by federal recovery dollars. Community support services will be cut by $65 million, group homes will get $15.9 million less, Medicaid rates paid to doctors and other health care providers will be cut by $76 million, and the Smart Start early childhood program will lose $16 million.
Lawmakers couldn't agree how to cut spending on public schools, so some of the burden for that will fall on local public school leaders.
The budget bars cutting teachers and raises class sizes in kindergarten through third grades. Local school districts will have to decide how to cut their share of $225 million in statewide reductions in grades 4-12, either by taking money for textbooks or other pots of money, or again turning to federal stimulus funds.
Alexander County Schools expect to lose about $860,000 once its share of the cuts is determined, Superintendent Jack Hoke said. That's better than administrators in the rural western North Carolina district were expecting in June, when they had to tell 18 teachers they wouldn't return when schools reopen later this month, he said.
"We may be able to save about half of those," he said. The school district employs 339 teachers for its 5,600 students, he said.
Winston-Salem/Forsyth County Schools, one of the state's largest, expects to lose about $1 million in state funding, but that was better than Superintendent Don Martin had been expecting.
"It could have been a whole lot worse. I don't think we're going to have to lay anyone off at the start of the school year," he said. The district has lost 75 teachers since June, but all left on their own, Martin said. There won't be any money to replace any of the remaining 4,000 teachers if they quit during the school year, he said.
"The long-term fear is what's it going to be like next year" if the recession and state budget cutting continues, Martin said. "I think everybody has a lot of anxiety about next year."
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