Rotarians got a brief lesson on the topic that continues to concern state officials as members of the General Assembly approach election year.

Sen. Bill Purcell spoke on the North Carolina state budget to the Laurinburg Rotary Club on Thursday, a subject the Democratic legislator says was hotly debated this summer and will likely remain a difficult issue for the coming years.

The budget may bore some, Purcell said, but he feels it is one of the most important issues in North Carolina today.

"This is one thing that we do in Raleigh that in one way or another affects virtually every citizen in North Carolina," Purcell said."This has been a very extraordinary year in budget writing. Most people will agree that the recession started in December of 2007, but it really hit home in the North Carolina General Assembly on April 15 the tax checks came in 39.7 percent below the previous year. The final revenue collections this year were $3.2 million below our budget, or about a 10.8 percent shortfall."

"Nothing like this had been seen since the Great Depression of the 1930s. This recession is now in its 23rd month, which is the longest recession we've had since the Great Depression."

Purcell says that while most economists have declared the recession over and most expect to see employment improvement in the spring of 2010, a full recovery will be slow and is still far off.

"Revenues will probably not be where they were projected to last year until 2013 or 2014."

Purcell highlighted some points in the budget overhaul in a PowerPoint presentation.

Among the statistics he mentioned were:

• The budget was cut from $21.3 billion for the 2008-2009 fiscal year to $19 billion for 2009-2010, or about 11 percent.

• Education funding, which makes up 58 percent of the state's budget, was cut from $11.418 billion to $11.163 billion.

• Appropriations to health and human services, which makes up 21 percent of the state's budget, were slashed from $4.9 billion to 3.9 billion.

• The reserve fund, which is used in the event of a disaster,

• The state cut 2,000 positions from the budget, of which 700 were filled.

After the budget cuts, there was still a more than $1 billion budget shortfall.

"One way you can do that is to fire teachers, decrease class sizes, cutting money from many programs for the elderly or the food bank or many other things. Things they are now doing in California."

The legislature decided to take a different route. It raised taxes.

Income taxes were increased on individuals who make over $60,000 and couples who make more than $100,000 a year. Sales tax was increased by one percent. Sin taxes were hiked across the board.

The result of the $2.3 billion in budget cuts and $1.13 billion in tax increases was a balanced budget, at least based on state projections.

However, Purcell says the recession cut state revenues more than experts had predicted, painting a dire picture for the state's next budget.

"In the first four months of this year, revenues were down $95 million – about 1.5 percent below budget – sales tax collections are down and withholding tax is down 3.5 percent compared to last year," Purcell said.

Medicaid enrollment has swelled in the early months, overspending its budget by $300 million, Purcell said.

"The budget does not look any better for next year, or the rest of this year."

One issue the legislator said needs tackled is how businesses and services are taxed.

The Laurinburg state senator says he's currently on a committee looking at that very topic.

"North Carolina's tax structure is based on a 1930s economy where it is textiles and furniture and agriculture," Purcell said. "We currently tax 30 services in North Carolina, and many tax a lot more – some tax over 130 services – so this committee was a bipartisan committee and it was pretty much in agreement that we need to update our tax structure, not to increase taxes but to gives a more stable source of income."

Purcell said any change in tax policy is likely years off.

"I think that for this to happen next year, which is an election year, is very unlikely.

If you start taxing your haircutter, your car repairs, people would be pretty upset. I think it is something that has to be done and something that will be done eventually."

He pointed to the current budget woes as an example of what happens with an outdated tax code. Revenues would be stronger if the state weren't so reliant on the disappearing manufacturing sector for its income.

Purcell is a six-term state senator from Laurinburg who serves as a co-chairman of the Appropriations on Health and Human Services committee, the Health Care Committee and the Legislative Task Force on Childhood Obesity. He is also a member of Appropriations Committee, Commerce Committee, Education and Higher Education Committee, Finance Committee, Pensions and Retirement and Aging committee and the Select Committee on Employee Hospital and Medical Benefits.

Purcell is a licensed doctor and retired pediatrician.