Cuts alone won't fix state budget

December 28, 2010 

— An old line says that if the only tool you have is a hammer, every problem starts to look like a nail.

This lesson applies to most facets of life but especially to the state budget. Yet recently, Gov. Beverly Perdue made comments that implied the only tool we should look at when fixing the state's economy is the budget ax.

This is incorrect and shortsighted. Simply put, a cuts-alone approach would fail to balance the budget in the short term and would devastate North Carolina's economic recovery in the long term.

Slashing essential public investments will only undermine our economic future. North Carolina needs healthy children, a well-educated work force and high-quality transportation infrastructure in order to thrive. Failing to fund the vital programs that educate kids, keep us healthy and create a positive business climate is a recipe for economic disaster.

Even the most drastic cuts-only approaches Perdue has asked state agencies to explore will not close North Carolina's budget gap.

Wishful thinking and fuzzy math aside, the numbers could not be more clear.

The latest estimates from the General Assembly's Fiscal Research Division say that anticipated revenues will fall $3.7 billion short of what is needed to sustain current-level investments in North Carolina's public structures. Perdue requested worst-case budget cut proposals of 10 percent for public schools, community colleges and universities and 15 percent for all other state agencies

Even those would come up $1.1 billion short of fixing North Carolina's estimated revenue shortfall next year.

How much exactly would we need to cut in order to close the budget gap with a slash-and-burn approach? Assuming Perdue holds true to her pledge to limit education cuts, non-education agencies would face 27 percent across-the-board cuts compared to this year. Worse, that's more than a one-third cut when compared to pre-recession levels.

That would create a lot of suddenly unemployed teachers and mental health workers. And when you're suddenly unemployed, you're not paying taxes, which just makes the revenue picture even worse.

Besides the destructive impacts these cuts would have on both private- and public-sector jobs, think about all the devastated families. With budget cuts of that nature, we're talking about an epidemic of seniors without access to life-enhancing care and a generation of kids with overcrowded classrooms.

This is a price that we are not willing to pay in North Carolina. Efficiencies alone are not going to close the budget gap, and cruel, short-sighted cuts would shift our economy into reverse.

So how do we do it? We need to use every tool in the toolbox, not just one.

North Carolina needs to use a balanced approach, including addressing revenue and the way we collect it. That's why it is a mistake for the governor to take any options off the table at this point.

Smart revenue reform could modernize a system that hasn't been updated since the 1930s. This would help us more efficiently fund the public investments in initiatives like Smart Start, More At Four and community-based care that Perdue - and North Carolinians - value.

Addressing revenue would help keep North Carolina on the road to recovery, save the state money in the long run and make future budget crises easier to manage. It's an important tool in a lawmaker's toolbox.

For a prosperous North Carolina, we need fuel for our state's economic engine. Now is not the time to take options off the table. Instead, we should preserve the investments that make our state strong.

Edwin McLenaghan is a policy analyst with the Budget & Tax Center, which is associated with the N.C. Justice Center.

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