Perdue shifts funds; GOP rolls eyes

Governor says action is sound, gets refunds to taxpayers; Republicans see 'business as usual.'

Staff WritersMarch 9, 2011 

staff

Gov. Bev Perdue

TAKAAKI IWABU — TAKAAKI IWABU - tiwabu@newsobserver.com

— Democratic Gov. Bev Perdue on Tuesday performed a bookkeeping move to provide money for state tax refunds, an action that raised questions from Republican lawmakers.

The governor announced that her administration would borrow $490.9 million from various state funds over the next three months in order to send out taxpayer refunds in a timely fashion.

"I want the money back where it belongs - with the taxpayer," Perdue said.

But Republican lawmakers questioned whether it was sound budgetary practice to borrow money from state funds to pay for the refunds.

"We see a continuation of business as usual in terms of a refusal to face up to the serious fiscal issues that are right in front of us," said Senate leader Phil Berger of Eden.

House Speaker Thom Tillis called the money move "just a reactionary approach to managing a fiscal crisis that makes no sense."

But David McCoy, the state controller, said North Carolina has been using the same approach off and on since the days of Republican Gov. Jim Martin in 1991. McCoy said as revenue dips in February, the state often makes "interfund transfers," moving money to pay bills.

The governor, McCoy, state Treasurer Janet Cowell and state budget director Andy Willis signed a memorandum borrowing money at 1 percent interest to be repaid by June 30.

The total includes $130 million from the public school building fund, $100 million from the Employment Security Commission reserve, $80 million from the Clean Water Management Fund, $30 million from motor fleet management as well as money from several other funds.

Just last month, Perdue vetoed a bill passed by the legislature that would scoop up various state funds for use in preparing for the $2.4 billion budget shortfall.

But the governor said there was a large distinction between the bill and her action Tuesday - one was permanent taking and the other is a temporary borrowing that will be repaid.

"It's very legal," Perdue said. "From my perspective, it's just a prudent way to manage cash flow."

The controversy arose whenMcCoy explained the move to GOP legislative staffers Monday night. At Tuesday morning's briefing, both Berger and Tillis criticized it.

"I am not sure they had all the information," Perdue said. "This is something they ought to want to do."

But Berger was not convinced by Perdue's explanation.

"A year ago we had this same problem, and it was not until last night that we were apprised that there was a cash flow issue," Berger said. "What have they been doing over the past 12 months to get ready for this?"

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

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