The Lincoln Tribune recently published this article of mine detailing the overly-optimistic revenue projections used by Gov. Perdue's office to "balance" her budget plan.
A few highlights:
digits, the governor’s budget office projects increases in state income, sales
and corporate tax revenue for the coming fiscal year. For example, sales tax
collections are estimated to rise at a healthy five percent pace.
Note also that the state budget office doesn’t have a very good track record of
late. For instance, this time last year the governor’s budget proposal predicted
a 5.5 percent unemployment rate in North Carolina for 2009. Also predicted was a
“modest” 3.5 percent growth in General Fund revenue for the current fiscal year
– in stark contrast to the actual 6.3 percent decline being realized. Such
misjudgments are a large reason why state government is facing such massive
According to the governor’s proposal, appropriations in fiscal year 2010-11 will
exceed state revenue by more than a billion dollars, with the hole to be plugged
by federal stimulus money. This one-time provision, however, produces a
structural deficit of at least a billion dollars as we enter fiscal year
Federal stimulus funds may provide a short-term bailout for the state budget.
The reality is, however, once the federal aid is gone, North Carolina will not
be able to sustain spending levels without significant tax increases.