State of the State: North Carolina in 2011

This post is an addition to the ten-part series evaluating 2011 State of the State (SOTS) speeches in states with the ten worst projected relative budget deficits in FY 2012. This addition was made due to the substantive nature of North Carolina Governor Beverly Perdue’s SOTS address. Budget data is from the Center on Budget and Policy Priorities’ (CBPP) recent budget report, and SOTS speech text is from Stateline. CBPP’s data on states’ FY 2012 budget deficits as a percentage of their FY 2011 budget is the benchmark for relative budget deficits.

According to CBPP, North Carolina is projected to a $2.4 billion budget deficit in FY 2012, which amounts to 12.7% of the state’s FY 2011 budget.

On February 14, 2011 North Carolina Governor Beverly Perdue delivered her 2011 SOTS speech (full text available here). She begins her SOTS speech by acknowledging that North Carolina policymakers wrangled with over 5 billion in budget deficits over the past two years by cutting services, furloughing workers, freezing public employee salaries and closing programs. Below are some policy highlights from Gov. Perdue’s address, which reflect her priorities in handling the state’s fiscal challenge in FY 2012:

  • Spending Cuts: Gov. Perdue’s proposed budget is $2.2 billion less than the budget she inherited in 2009, reduces per capita spending by 11% and eliminates thousands of positions for state workers. Her budget would continue the hiring freeze and halted pay raises for most jobs, and would offer early retirement packages for qualifying state workers.
  • Tax Increases: She does not propose any tax increases in her SOTS address; instead she proposes tax cuts for corporations and small businesses (for details, see the Economic Development section below).
  • Government Reform: Gov. Perdue proposes aggressive government reform initiatives sending over 345 state boards and commissions and more than 900 state regulations for review by the legislature. She pledges that if these regulations are repealed, she will send “(hundreds more) in the coming weeks.” She also proposes consolidating 14 state agencies down to 8 and privatizing some services. Gov. Perdue highlights the expanded use of technology, citing public-private partnerships in law enforcement, Medicaid fraud prevention and education. She discusses several areas of education reform. First, more than 46,000 North Carolina students are participating in online education, which she pledges to continue moving forward. The state won $400 million in federal Race to the Top Funds for its innovative education reform program—Career and College Ready Set Go!—that will be spent over the coming years. Lastly, she rebrands the state’s College Promise program, naming it North Carolina’s Career and College Promise. Through the Career and College Promise program the state will subsidize the cost of two-year college degrees for students that meet certain criteria.
  • Economic Development: Gov. Perdue proposes tax cuts for corporations and small businesses, noting that North Carolina has the highest corporate tax rate in the southeast. Specifically she asks the legislature to lower the corporate tax rate to 4.9%. She goes on to recognize the North Carolina Rural Center’s Capital Access Program, which taps federal Treasury funds and loans them to small business owners. She discusses expanding the North Carolina Business Preference program to include information technology purchases; this program gives in-state companies the chance to match low bids for state government contracts.

Policymakers in the Tar Heel state face fiscal challenges that are not unique. To see what other states are doing, read the American Legislative Exchange Council’s State Budget Reform Toolkit and Reason Foundation’s Annual Privatization Report 2010: State Government Privatization section.

For the previous articles in this SOTS series, see: Wisconsin, California, Illinois, Nevada, Connecticut, Minnesota and Oregon.