What the new state

budget means for Watauga County
By Scott Nicholson

With Gov. Beverly Perdue signing a $19 billion budget into law, concerns remain over the effects of tax hikes and education cuts.

The budget was adopted by the General Assembly along party lines, with Democrats in the N.C. Senate approving it 27-18 and in the N.C. House of Representatives by a 66-52 margin. N.C. Sen. Steve Goss (D-Watauga) and N.C. Rep. Cullie Tarleton (D-Watauga) supported it.

The budget adds about $1 billion in new taxes, with tax-reform enthusiasts claiming the tax increase will hurt small businesses and job creation. About $2 billion of services were trimmed from the budget, including cuts to schools that have already led to a 15 percent reduction in instructional personnel for the Watauga County public school system.

Most of the taxes are billed as “temporary,” with a one-percent increase to the sales tax slated to end in mid-2011. Cigarette taxes will climb by 10 cents a pack, and corporate taxes will increase 3 percent for two years.
A middle-class tax will also create a short-term surcharge on income taxes for those making $60,000 a year or more, amounting to the equivalent of a 2 percent tax increase for that bracket.

Couples earning between $100,000 and $250,000 will face a 3 percent hike.

Besides education, major cuts to health and human services, medicaid reimbursement, early-childhood education programs and community support services were part of the effort to deal with a budget shortfall of more than $4 billion.

“This budget for the most part protects education and the classroom,” Tarleton said.

“Total education cuts are less than 3 percent. Full enrollment growth for K-12, our community colleges and our universities is provided. While the new revenue package allowed us to restore some of the worst cuts previously made in education and health and human services, there will still be cuts all across state government.” Tarleton said the average departmental cut was 8.2 percent. “As I said during debate, anyone who thinks I enjoy raising taxes is nuts, but you can only cut so much,” he said. “You cut the fat, then you’re into muscle and then the bone, and this budget cuts to the bone. Bottom line is, we did the best we could with what we had to work with.”

Tarleton said there were not enough resources to fund all the critical needs, including health and human services, mental health and protective services. However, federal stimulus money helped bridge the shortfall and kept cuts to a minimum. “There are no salary cuts or furloughs in this budget for our hard-working teachers and state employees,” Tarleton said.

Watauga Schools Superintendent Marty Hemric said he expects no further teaching cuts but doesn’t foresee restoring some of those positions under the new budget.

“In anticipation of the reductions in state revenues, we began reducing programs and materials and supplies early last school year,” Hemric said. “The gravity of the loss of revenue still forced us to reduce positions. Our estimates from early June, which were based on the House proposal, were sufficient in covering the number of positions we must reduce due to lower funding.

“We do not anticipate having to reduce any further positions in response to the discretionary model the General Assembly announced earlier this week. In the end, the reductions are basically the same as we were facing in June. Teaching positions and teacher assistant positions were the last area we turned to in making these regretful reductions.”

Goss said the tax increases were necessary, wanting to protect jobs and essential government services. “We had to face the hard fact that some form of revenue increase from increased taxes would be necessary,” he said. “A principle consideration for me was the belief that in hard times it is the proper responsibility of a community to share the burden that is falling on some of our members.”

Goss was also wary of the $1.3 billion in federal stimulus funds that was used to prop up the budget for a year, expecting larger budget challenges next year. About 2,000 jobs were cut statewide, including 1,300 vacancies that will now go unfilled.

Goss said 87 percent of state residents would be unaffected by the income-tax hike, while the sales-tax increase will spread the burden to all residents. Goss also said cigarette and alcohol taxes helped pay for the rising health care costs associated with the products. “I could not support any revenue increases that did not include tobacco and alcohol,” Goss said.

Goss saidone of the themes that emerged from the budget negotiations was the belief that there is waste in state government. “I have discovered that one person’s waste is another’s ‘essential’ service,” he said.

“Nevertheless, we did cut the state’s spending substantially. When I consider the personal impact of these cuts on our neighbors, I do not consider them minor.”

Goss was also concerned about what he considered a lack of constructive dialogue during budget debates. “The times require us all to work together,” Goss said.

Action For Children, a child-advocacy organization, pointed to cuts in money for group homes, public health, social services and programs for disadvantaged or disabled youths. However, the Health Choice program that provides health insurance for low-income children was increased by 12 percent.

Americans for Tax Reform said on its Web site, “The 2009 legislative session should make one fact very clear to all North Carolinians: as long as both chambers of the legislature and the Governor’s mansion remain controlled by Democrats with a penchant for tax hikes, the debate at the capitol will always be over what taxes will go up, not whether they should go up.”

The state had been operating on an interim budget since July 1. The budget is available online at www.ncleg.net.