State's budget offers ammo for all

Staff WriterJuly 1, 2010 

— Democrats celebrated the state's new $18.9 billion budget with a public signing ceremony Wednesday, but the anti-incumbent sentiment among voters means Republicans see potential political gains as well.

House and Senate Democrats are touting tax breaks for small businesses and plans to spare primary and higher education from the most painful cuts. Democrat Gov. Bev Perdue, flanked by schoolchildren at a signing ceremony Wednesday, touted programs she says will create jobs and a pet program that will give teachers diagnostic tools to keep a close eye on their students' progress.

Republicans can go back to their home districts and talk about how the Democrats' budget doesn't prepare the state for a deficit that could grow to $3 billion next year. They will talk about how Democrats put off a decision on how to cope with the increasingly likely possibility that the state won't get half a billion dollars in federal Medicaid money.

Both sides believe they won political talking points for the fall election.

"Those that favor the budget are talking about it like you talk about your grandchildren," said Rep. Ronnie Sutton, a Robeson County Democrat who lost his primary and won't be back next session. "Those who hate the budget are talking about it like the guy who broke into your house two weeks ago."

With an ethics and criminal probe into former Democratic Gov. Mike Easley's administration and a national electorate that so far appears hostile to incumbents, the budget battle took on greater weight than dollars and programs this week. The tally was almost entirely along party lines.

"We kept our eye on the goal, and that goal in every decision has been about a competitive North Carolina that works for all of our citizens," Perdue said at the signing ceremony Wednesday night. "I can't tell you how happy I am about the work of the House and the Senate."

All the ceremonial pens and congratulations were in stark contrast to last year's budget, which included a tax increase and deep cuts. Perdue signed that budget in private.

"This budget for them is about getting past the next election," said Sen. Phil Berger, an Eden Republican and the chamber's minority leader.

Talking points both ways

Democrats control each chamber by at least 10 votes and dominate the budget writing process. This week they accused Republicans of calling for spending and tax cuts that would not have met the constitutional requirement for a balanced budget.

"I have found that 90 percent of the time when you say, 'Where shall we cut?' nobody wants to offer up their ox," said Sen. A.B. Swindell, a Nashville Democrat.

For Republicans, the budget offers them a chance to talk about a familiar theme: that the state budget should be written from scratch, and ineffective or inefficient programs should get cut. Republicans routinely demand that the state lower its tax and regulatory burden on business and complain that Democrats don't give their ideas full consideration.

"They grow government at the expense of the private sector," Berger said.

The budget protects teachers' jobs by capturing money from the state lottery. It fully funds a surging enrollment in community colleges brought on by high unemployment, and it spares the UNC system from the more draconian cuts proposed in the House version of the budget. Health and Human Services spending took a deep hit, including hundreds of eliminated positions and a $50.7 million cut to in-home personal care services for Medicaid recipients.

Lawmakers and Perdue faced an $800 million revenue shortfall brought on by the recession. That problem would grow worse by another $519 million if Congress fails to deliver federal Medicaid money the budget anticipates.

Without Medicaid ...

The solution to that problem is a contingency plan. If the Medicaid money isn't delivered by January, the budget includes a prioritized list of actions that starts with raiding reserve funds. It gets progressively worse. Medicaid provider rates would be cut, the state would slash its contribution to the state retirement system, and then spending would be cut by 1 percent across the board.

Treasurer Janet Cowell, a Democrat, has noted that cutting the retirement system payment would leave an even bigger bill for next year.

'A dangerous path'

"We are starting down a dangerous path," Cowell told lawmakers in a message Republicans quoted in floor debate this week. "I urge legislators to uphold the 69-year tradition of meeting our pension obligations lest we go the way of too many credit card debtors who find themselves in a deep hole they cannot get out of."

Cowell repeated a Republican warning that next year's budget deficit will be $3 billion because the tax increases last year will expire and federal stimulus dollars will lapse.

"We got a budget that is shrinking. We got a budget with no new taxes. So they had to find something else to complain about," said Rep. Hugh Holliman, a Lexington Democrat and the House majority leader. "Now it's next year's budget."

Perdue has not ruled out ordering more spending cuts through executive order.

No one is arguing that next year's budget won't present problems.

"It is our job to fix the budget now," Swindell said. "We will fix the budget again, whoever is in charge."

ben.niolet@newsobserver.com or 919-829-4521

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