MEDIA RELEASE: Gov. Perdue takes a reasonable approach in the face of a recession that has devastated North Carolina’s budget, new study says



BTC report shows that the recession has impacted state services by a full 10 percent, even considering federal assistance


RALEIGH (May 5, 2010) – Gov. Beverly Perdue’s proposed budget takes a balanced approach to addressing North Carolina’s fiscal shortfall, but the worst recession in generations has exacted a devastating toll on the state budget – and the vital services that the budget supports.

A new study out this morning from the NC Justice Center's Budget & Tax Center estimates that the net effect of the recession on the scope of state services is approximately 10 percent, meaning that even when accounting for additional federal assistance the state budget is now 10 percent smaller than it would need to be to bring services back to pre-recession levels.

In a time of serious fiscal crisis, Gov. Perdue's budget balances spending cuts with the strategic use of federal dollars and revenue increases,” said Elaine Mejia, director of the NC Justice Center's Budget & Tax Center. “No matter what, this recession will continue to be painful for working families, but the governor’s budget takes a responsible, if painful approach to get North Carolina back to building prosperity.”

By reducing net appropriations by $396 million, increasing revenue availability by $213 million, and relying on $578 million in additional federal recovery assistance through an increase in federal Medicaid funds, Gov. Perdue's budget uses multiple strategies to remove North Carolina from its fiscal vise.

The governor’s proposed spending reductions are a combination of savings from increased efficiency in state government, discretionary cuts that local school districts and state agency heads would have to make, and outright cuts to certain programs that would result in fewer services.

The proposed adjusted budget represents a reduction of $410 million in spending, which is two percent of the certified General Fund budget in place for the next fiscal year. Fiscal year 2010-2011 begins on July 1.

When federal recovery assistance is accounted for, the spending in the proposal is very slightly more -- $168 million, or 0.8 percent – than in the certified budget.

The governor’s proposed budget also includes an additional $1.1 billion in so-called expansion spending, more than half of which will cover enrollment growth in Medicaid and higher education, boost the state’s rainy day fund, and increase investments in the state’s retirement system. It includes funding for a few new initiatives, including $40 million for handheld electronic testing devices that help teachers gauge student progress and $15 million for a fund to provide grants to small businesses that add jobs and hire workers who have been unemployed for more than two months.

This budget shows us the governor has the right priorities,” said Meg Gray Wiehe, a policy analyst with the Budget & Tax Center. “We should try to protect the programs that help North Carolina’s families first – health care, education, and job creation. Lawmakers should consider additional revenue increases to protect effective programs like these.”

FOR MORE INFORMATION, CONTACT: Elaine Mejia,; Meg Gray Wiehe, 919.856.3192; Jeff Shaw, Director of Communications, NC Justice Center, 503.551.3615,