Perdue prepares to slash budget

Citing gloomy financial facts, the governor signs an emergency order directing officials to come up with cost-cutting options

RALEIGH -- Faced with a worsening economic situation, Gov. Beverly Perdue took emergency action Tuesday night, laying the groundwork for tough measures likely to include budget cuts, delay of public works projects, and other austerity measures.

Perdue issued an executive order directing budget officials to give her, by the end of the week, cost-cutting options that North Carolina government has not seen since the recession faced by her predecessor Mike Easley eight years ago. State government faces a budget shortfall of as much as $3 billion, or more than 10 percent of last year's $21.5 billion budget.

Among the possible measures are canceling state purchases and dipping into pots of money besides the General Fund to finance the daily operations of government.

The new governor did not say what steps she will take, or how much she hopes to save. But the executive order gives her the legal authority to act when her budget advisers come to her with recommendations later this week.

"Like most states," Perdue said in a statement, "North Carolina is being deeply impacted by the global recession. As Governor, I have a constitutional requirement to balance North Carolina's budget, and I intend to do so responsibly."

Dana Cope, executive director of the State Employees Association of North Carolina, said Tuesday that Perdue's order did not surprise him. "It's not unique to North Carolina. The entire country is going through this crisis. I knew Governor Perdue was going to have to do something before the legislature actually came into session."

Cope said that because of the economic downturn there were more demands on state government agencies than ever. "You can go down the line, agency by agency. In these tough economic times it's those state employees who are stepping up."

More bad news

Perdue took the action after getting more bad economic news from her budget advisers Tuesday, according to David Kochman, a spokesman for the governor. The advisers told her that the national economic slowdown is diminishing crucial tax revenue.

She issued the order as she prepared to fly to Washington this morning to meet -- along with the nation's other governors -- with President-elect Barack Obama's transition team. She will also meet with North Carolina congressional leaders to seek help from the proposed federal economic stimulus package.

The action underscores how the first months of Perdue's newly minted administration are likely to be dominated by efforts to pay for state government in a weakening economy.

Last month, Easley had ordered state agencies to work up proposals that cut as much as 7 percent from next year's budget. The deadline for the agencies to come up with their budget cuts is today.

The state Department of Transportation has already laid off dozens of temporary hourly workers, and hundreds more are expected to lose their jobs.

Perdue noted several sobering statistics for the fiscal year that began last July:

* State revenue from withholding income taxes had fallen 1.2 percent in the second quarter, after increasing 2.7 percent in the first quarter.

* Sales tax collection weakened, declining 10 percent in the second quarter after a drop of 3.6 percent in the first quarter.

* Corporate profits were down, and the stock market dropped 38.5 percent in 2008.

* State employment has declined in eight of the past 10 months.

Measures being contemplated by Perdue:

1. Cut state spending.

2. Halt spending on capital projects for which money has been appropriated but is not under contract. If necessary, capital project money could be transferred to help run the day-to-day operations of government.

3. Borrow money from other state pots of money to help run daily government operations.

4. Delay or cancel purchase orders.