North Carolina's Democratic governor on Thursday proposed eliminating more than 10,000 government jobs and cutting corporate taxes as part of a $19.9 billion state budget.
The spending plan Governor Beverly Perdue sent to the Republican-controlled General Assembly in Raleigh is nearly $1 billion higher than the current year's spending plan, to make up for $1.4 billion in federal stimulus funds that had been used to close budget shortfalls the past two years.
In a proposal welcomed by Republicans, Perdue also wants to attack the state's nearly 10 percent unemployment rate by reducing North Carolina's corporate tax rate to 4.9 percent from 6.9 percent, making it one of the lowest in the nation.
Other U.S. governors battling weak local economies, including Republican Rick Scott in nearby Florida, are also mixing proposals for tight spending and tax reductions in the fiscal 2012 budget-writing season now underway.
According to the Center on Budget and Policy Priorities, nearly all states are considering spending less in the coming fiscal 2012 than in 2008. That was the last year before recession devastated state revenue.
Perdue closes North Carolina's budget gap estimated at $2.4 billion for the July 1 fiscal year in part by retaining three-quarters of a one-cent sales tax set to expire June 30. That would put the base tax most consumers pay at 7.5 percent, while still generating $827 million next year.
Senate President Pro Tempore Phil Berger, a Republican, said Perdue was breaking a promise to allow the temporary sales tax to expire.
Instead of making tough choices to tighten the state's belt, Governor Perdue is balancing the budget on the backs of North Carolina taxpayers and local governments, Berger said.
Republican legislative leaders said their budget plans would focus on cutting spending, limiting government power and supporting the private sector.
Perdue's budget proposal, which must be passed by the legislature, does drop a temporary surtax on income tax bills for high wage earners that had been in place for two years.
The governor took a hopeful tone in a letter to legislative leaders, pointing out that the state is projected to run a revenue surplus this year and still has its prized AAA bond rating.
This plan authorizes no new debt, utilizes one-time moneys for one-time expenses, contains no accounting gimmicks, closes the shortfall without damaging North Carolina's future and continues our tradition as a national leader in fiscal management, Perdue wrote.
In a news release, the governor claimed she had narrowed a $4.4 billion gap between expected revenue and planned spending over the next two years, putting the projected gap at $2.4 billion in fiscal 2012 and $2 billion in fiscal 2013.
The most painful changes appear to fall on state employees. Perdue said her budget would cut 5,200 positions largely by eliminating funding for 68 programs and reducing money for 71 other programs. Another 900 state government positions also could be eliminated, saving $208 million, through an early retirement program she announced this week.
The governor told reporters that roughly half the jobs being eyed for cuts were currently empty.
Perdue trimmed back state funding for public schools administration and school buses but said she would still provide state funding for every teacher and teacher assistant in the classroom currently funded by the state government.
The budget also would provide an unemployment tax credit for 135,000 small businesses, spend $75 million on improvements to university and government buildings and set aside $150 million for the state's rainy-day reserve fund.
(Additional reporting by Michael Connor in Miami; Editing by Padraic Cassidy)