Perdue’s budget was delivered to legislators just before both houses of the General Assembly adjourned Thursday, and when a final budget is passed later this year both of Richmond County’s delegates said it will most likely bear little resemblance to Perdue’s proposal.
“On balance, I thought it was a good budget,” N.C. Rep. Ken Goodman said Friday morning. “It wouldn’t raise any taxes, but it would lower the corporate tax rate and cut the (temporary) sales tax (passed in 2009) from 1 cent to three-quarters of a cent. It protects jobs and it protects education, but I’m sure this won’t be the budget we’ll end up with.”
“I think the budget will have a lot of changes before we make a decision on it,” N.C. Sen. Bill Purcell said Friday morning. “… The main thing she talked about (during her State of the State speech) was jobs and education, and she tied them both together. I feel like that’s what she’s done with the budget and those are the areas she is trying to protect.”
Both delegates predict a prolonged, pitched battle in Raleigh between Democrats, to which Perdue belongs, and Republicans who seized control of both houses of the General Assembly for the first time in more than a century during last year’s elections.
Education
Perdue’s budget would lop 10 percent from school administration and the Department of Public Instruction’s budget, but retains all teachers and teacher’s aides.
“She tried to stop the cuts at the classroom door,” Goodman said.
However, he explained the news isn’t all good for school districts across the state.
“The one thing that concerns me, and I don’t know that there’s anything that can be done about it, but her budget talks about transitioning worker’s compensation cost for all state employees, including teachers, to the counties, along with school bus replacement and legal expenses for tort claims,” Goodman said. “I don’t know how this would affect Richmond County Schools, but it would certainly be an added burden.”
There is also discussion in Raleigh about re-appropriating lottery funds, which Richmond County Schools uses to pay the interest on the [$25 million] school bond it used to build East Rockingham Elementary and improve other facilities.
“They’re (Republicans) are going to be looking for more places to cut, and education is where the money is,” Purcell said. “Education is where the money is, so it will be interesting to see what happens.”
Purcell predicted a proposed initiative to provide two-year scholarships to high school students at community college is one that will be contested throughout the budgeting process. “This isn’t all cuts - there’s also some expansion in her budget,” he said.
Public education accounts for more than half of state spending.
State employees
Of the 10,000 state positions eliminated under Perdue’s proposal, about 7,000 are vacant due to budget freezes, lack of qualified personnel or a “wait-and-see” approach among administrators.
“There’s some major cuts in this budget, and there have to be,” Purcell said of the plan. “Thankfully, about 7,000 of those positions are vacant, so at least she won’t be letting an individual go in those instances.”
Goodman said the cuts would be across-the-board, if accepted by the General Assembly.
Friday morning, County Manager Rick Sago expressed concern over transitioning state employees’ worker’s compensation insurance payments to the county-level, as well as the question of lottery money to pay debt service for capital improvements to schools.
He explained that while counties are limited to levying property taxes and collecting sales tax, the state has many sources of revenue.
“We’ve said all along that these unfunded mandates are unnecessary burdens on local governments,” Sago explained. “That goes for county governments and city governments.”
Temporary sales tax
Perdue’s budget rescinds a quarter of a cent of the extra 1 cents sales tax levied in 2009. Republicans in the General Assembly have called for the tax to retire.
Perdue didn’t ask for an extension of a surtax on income that was part of the 2009 tax package, Purcell explained.
“The big fight is going to be over the sales tax,” Goodman said. “The Republican majority is determined to let that go completely, and the governor has kept three-quarters of a cent of that sales tax in her budget.”
In raw numbers, Goodman said eliminating the tax completely would create another $800 million hole in the budget to fill or cut.
“That ($800 million) would affect teachers and teacher’s aide jobs,” he said.
Goodman discussed another proposal in Perdue’s budget to help state workers accrue years of service to achieve an early retirement. Those with 28 years of service would be granted two extra years so they can go ahead and retire.
“That may help close the budget gap in the short term, but in the long-term it would create a heavier burden on the state employees’ pension fund,” he explained.
There is also discussion of offering a one-time payment of $20,000 to some state workers to retire early at a discounted long-haul price, and $10,000 for those who are already eligible to retire.
“I don’t believe that would help us very much, though,” Goodman said. “The only people who would take that payment are those who would retire anyway.”
Economic development
One issue the governor most likely won’t be opposed on is her proposal to lower the corporate income tax rate 2 percent, making it the cheapest in the Southeast region.
“If you look at the total tax burden - including local and state taxes - North Carolina is about in the middle of the pack,” Purcell said. “However, we now have the highest corporate tax rate in the region. This, coupled with tax credits for small business in her budget, could prove to be valuable tools in recruiting businesses to come to North Carolina.”
He said the move is projected to save corporations operating in the state about $115 million in the first year, then shoot up to more than $300 million the second year.
The governor is expected to veto a bill later this month that would dip into funds used to recruit businesses to the state to close next year’s shortfall.
Staff Writer Philip D. Brown can be reached at (910) 997-3111 ext. 15, or by e-mail at pbrown@heartlandpublications.com.
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