Report: NC Budget Hole Worst in Southeast

Published August 19, 2010

The next fiscal year could be a perfect storm for North Carolina budget writers, according to an analysis by the bipartisan National Conference of State Legislatures, which ranks the Tar Heel State’s budget gap as the fifth-worst in the nation and worst in the Southeast.

Congress has passed a rescue package that would cover $343 million of North Carolina’s FY2011 $519 million funding gap for Medicaid. The remaining $176 million will be filled by diverting funds from six other budget line items, including disaster relief dollars and unclaimed lottery prize money.

$3 Billion Shortfall Remains
The NCSL report lumped North Carolina in with Nevada, New Jersey, Arizona, and Maine as the five states with the worst shortfalls as a percentage of their general fund budgets. The report’s authors estimated the state was facing a $5.6 billion budget gap for the 2011 fiscal year—about 25 percent of the state’s general fund budget.

During the short session of the legislature this year, lawmakers raised taxes and cut programs, but experts predict the shortfall still will be more than $3 billion.

The report estimates North Carolina will experience a $3.2 billion shortfall in the 2012 fiscal year, or about 17 percent of the general fund budget. Most of that is due to a loss of $1 billion in federal recovery funds and the expiration of $1.4 billion in temporary state taxes.

Republicans, the perennial minority party in the General Assembly, say Democrats missed an opportunity to shore up the financial scenario during the past session.

‘Have to Make Cuts’
“They’ve proven that they either don’t get [it] or don’t want to make cuts, and we have to,” said state Rep. Thom Tillis (R-Mecklenburg). “It should be alarming to everybody that our structural deficit is higher than any other Southeastern state.”

Rep. Hugh Holliman, a Davidson County Democrat and top leader in the House, told The Lexington Dispatch that unless the economic situation improves, Democrats would be ready to make cuts of up to $2 billion and extend tax increases.

“I don’t think there will be any more stimulus money, so we will have to go in and do some serious cutting again,” he said.

David N. Bass ([email protected]) is an associate editor of Carolina Journal, where a version of this article first appeared. Used with permission.