PINEHURST — Gov. Bev Perdue proposed a sweeping reorganization of state government Thursday that includes merging state agencies, a hiring freeze for state employees, and other measures aimed at cost savings.

The governor said such steps were necessary because North Carolina faces a budget shortfall next year that analysts now project to be $3.7 billion.

"Today, I lay out in broad strokes the picture of what I believe North Carolina's state government must become as we change the very way state government works," Perdue said in remarks to a Chamber of Commerce group meeting at the Pinehurst golf resort.

She said she would propose to the legislature when it convenes in January the broadest restructuring of state agencies in decades, merging 14 high-level state functions into eight. Those included:

Combining the Departments of Juvenile Justice, Correction, and Crime Control and Public Safety into a new Department of Public Safety.

Absorbing the Employment Security Commission into the Department of Commerce. Perdue said she hoped the change would result in better coordination of worker training programs.

Folding the Department of Administration into a new Department of Management and Administration that will include the Office of State Personnel, Information Technology Services and the Controller's Office. As part of the move, 100 or more computer service facilities scattered across state government will be shut down. Also a private group will be brought in to help run the computer operation.

More reorganization may be on the way.

"You have some agencies that appear not to have been touched," said Chrissy Pearson, an aide to the governor. "That won't last long."

'There will be layoffs'

The governor said the reorganization would save money by eliminating duplication, by making state government more efficient, and by reducing the work force, particularly middle management.

"Yes, there will be layoffs," Perdue told a news conference. "I'm not proud of it."

Perdue, a Democrat, conferred with the incoming Republican legislative leadership and the outgoing Democratic leaders before announcing her proposal.

Sen. Phil Berger of Eden, the incoming GOP Senate leader, reacted favorably to Perdue's plan.

GOP leader amenable

"We Republicans will be interested in working with her to effect some reorganization in state government," Berger said. "We do believe there are savings that can be had and efficiencies that can be realized by some consolidations."

House Speaker-elect Thom Tillis of Charlotte could not be reached for comment.

The proposal also got favorable marks from John Hood, president of the John Locke Foundation, a Raleigh-based conservative think tank.

"Moving towards a smaller, more streamlined bureaucracy is clearly a good thing," Hood said.

"I clearly like the merging of public safety agencies into one department and the combination and merging of the Department of Administration with other administrative agencies. Presumably it will save money."

Together NC, a coalition of 115 groups working to preserve state services, said spending public dollars more efficiently "will be a key strategy to a responsible, pragmatic approach to balance the state budget."

But the group said it can't be the only approach, and urged Perdue to consider supporting the raising of additional revenues or extending the $1.3 billion in temporary taxes passed by the legislature in 2009. They are set to expire next year.

'Non-critical' jobs freeze

Perdue also plans an immediate freeze on hiring of "non-critical positions" in her Cabinet agencies. She will ask other state agencies and community colleges and universities that are not under her direct control to do the same. The governor said examples of critical positions were probation and correctional officers.

She said she will ask the legislature in January for authority to extend the hiring freeze to all state jobs. Berger said he believed the Republican legislature would be inclined to grant her that authority.

Meanwhile, she urged reporters to ask the leaders of the other state agencies "hard questions" about whether they would voluntarily comply with the freeze.

In addition, the governor plans to send the legislature a list of 150 boards and commissions that she thinks should be reviewed and justified by the end of 2011. Under her proposal the boards and commissions would automatically be eliminated, or sunset, unless reauthorized by the legislature. (There are more than 400 boards and commissions.)

"Many of them, like the Utilities Commission or the Industrial Commission, are really critical to our state's businesses and our people," Perdue said.

"But I believe some of them need to justify their reason for being."

Reducing duplication

She said that greater emphasis will be placed on reducing duplication, such as centralizing purchasing, so that bulk purchases can be made to save money.

Perdue suggested there was no need for 377 human resources positions in state government, not including 60 in the Office of State Personnel, or 703 financial positions or 149 purchasing staff.

Her administration has already put out bids for a study of a public/private partnership for bulk purchasing that the administration thinks could ultimately result in saving $30 million per year. She noted, for example, that one state agency purchased cans of tuna for $42 a case, while another agency bought the same tuna for $29 per case.

The governor said her proposals included only broad outlines and that she would provide details when she submits her budget proposal to the legislature early next year. But she said the changes "can save tens of millions of dollars immediately and trim state government rosters."

"But those steps alone won't be enough to set government straight," she said.

"I'm talking at a macro level. The dramatic savings - the hundreds of millions of dollars - will be in the budget I present to the General Assembly next year. These savings will result in duplicative program elimination and cuts to middle management."

Rob.Christensen@newsobserver.com or 919-829-4532