Christensen

A better way: Cut state pay

Staff WriterDecember 26, 2010 

The last time North Carolina state government faced a budget crisis like the one it will confront next year, the state had one of its best governors in charge.

That was O. Max Gardner, a Shelby textile mill owner, lawyer, undersecretary of the U.S. Treasury and confidante of presidents and business tycoons. He was on his way to take his post as U.S. ambassador to Great Britain when he died of a heart attack. (He was also the only man to captain both the Carolina and State football teams.)

To cope with the Great Depression, Gardner oversaw the reorganization of state government. Gardner and his protégé, J.C.B. Ehringhaus, cut state salaries by one-third in the early 1930s to avoid widespread layoffs.

Gov. Bev Perdue faces the worst crisis since the Great Depression, with a projected $3.7 billion shortfall in a $21 billion budget next year. Because the legislature seems unlikely to raise taxes, we are talking about a roughly 18 percent budget cut.

To put that in perspective, you could close the shortfall if you shut down both the University of North Carolina and the state community college systems.

The state could be looking at laying off 21,000 public employees next year, the N.C. Budget & Tax Center, a private liberal group, concluded after analyzing the budget cuts that Perdue has asked her departments to prepare.

That is about 7.4 percent of the state's work force.

One idea being floated by one of the state's wise men, John Sanders, former director of the Institute of Government in Chapel Hill, is that Perdue and the legislature follow Gardner and cut salaries rather than institute massive layoffs.

Though temporarily cutting salaries would be very painful, it would spread the pain equitably.

Many people, of course, live very close, and a pay cut of, say, 15 percent could cause some people to lose their cars or their houses.

But there are good reasons to think about this. At a time when the state is supposed to be focused on creating jobs, such a massive layoff could drive the state's unemployment level to 10.2 percent.

Large-scale layoffs would save money, but there would also be plenty of expenses - separation costs, unemployment benefits, training and other costs.

Putting 21,000 people out of work is bound to affect car dealers, real estate agents, merchants and the economy in general.

I've worked in the private sector all my life, and I've seen a lot of friends and colleagues lose their jobs in this recession. I've taken pay cuts and furloughs.

Throwing thousands more people out on the street in this difficult job environment should be a last resort.

It was something that Gardner and other Depression-era governors managed largely to avoid in North Carolina. Gardner and North Carolina received national recognition for the way it handled the budget crisis during the Depression. Gardner's speech to the Kentucky General Assembly was entitled "New Conditions Demand New Remedies."

rob.christensen@newsobserver.com or 919-829-4532

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