Easley released the budget Wednesday, and its most noticeable element is the absence of enormous cuts in any single area. He did not gut social services, mental health, schools or corrections. Although everyone took a hit in the governor¹s budget and many folks are likely to complain, the surprise in his budget is that hardly anyone got zeroed out of it.
A budget shortfall is a disparity between expected revenues and expected expenses. Economists predict how much money the current tax structure will raise, and budget analysts compare that to state agency estimates of what they need to continue to provide existing services.
Easley closed the shortfall first with some good fortune.
Medicaid is one of the fastest-growing elements of the budget. The federal-state-county match program for the poor, the disabled and the elderly, was widely expected to need 13 percent more money next year.
But Easley held the increase to 8 percent, and the 5 percent difference meant $252 million.
Many budget watchers thought a quarter-billion cut in Medicaid was needed, but they didn¹t expect it to come so painlessly. Of the money cut, $167 billion comes simply because the number of people using Medicaid did not rise as much as feared. The rest comes from refusing to provide inflationary increases to those who provide services to Medicaid patients.
Easley also relied on optimism to pare away a big piece of the $2 billion shortfall.
He projects tax revenue growth next year of 4.7 percent. That’s between $600 and $700 million. Historically, that’s a low figure, conservative for a North Carolina economy coming out of a recession. And Easley tried to sell it as a cautious revenue estimate.
But who says that the recession is going to end, or that the U.S. won’t be fighting two wars by June? Remember, last year the state projected revenue growth of about 1 percent, including tax increases.
Speaking of tax increases, Easley also looks optimistic about his own political future. He chose to extend $460 million worth of taxes that were scheduled to expire on July 1. He says he can¹t propose a tax cut this year. Republicans say he is raising taxes by continuing taxes he had promised to cut. Easley is optimistic that the public will buy his version of the story when it comes time to vote in 2004.
After the Medicaid cut, the tax cut delays and the healthy revenue projection, Easley’s challenge was down to about $500 million. That’s no easy amount of money to cut, but it’s a lot easier than $2 billion. He picked and jabbed at hundreds of line items.
Counties took a big hit, losing $59 million in school construction funds at the same time that the state¹s school districts will have to endure $42 million in cuts.
Easley’s budget now goes before legislative spending committees which are likely to change it considerably.
Paul T. O’Connor writes for Capital Press Association in Raleigh.
