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The Associated Press February 17, 2011, 5:47PM ET

NC Gov. Perdue unveils $19.9B budget for next year

North Carolina Gov. Beverly Perdue rolled out a state budget proposal on Thursday that she said would eliminate 10,000 state government positions next year, extend a portion of the temporary sales tax and cut, eliminate or change scores of programs and agencies to close a $2.4 billion budget gap.

Unveiling her plan to the new Republican-led Legislature, Perdue said her spending plan for the year starting July 1 would be $19.9 billion, nearly $1 billion higher than the current year's plan, but had to make up for $1.6 billion in lost federal stimulus funds used to close budget shortfall each of the past two years.

Perdue's budget office said as many as 3,000 of the positions are currently filled. Her budget proposal would set aside money to encourage early retirement for about 1,000 employees. Perdue also offered no pay raises for state employees and teachers and required some workers to pay a monthly premium for their own health insurance for the first time on top of a premium increase for dependents.

Program cuts would include closing the state's nine welcome centers on Tuesdays and Wednesdays and state parks two days a week. Two state forests open to the public also would be closed.

"There is angst to go around," Perdue said at a news conference. "As governor, I had a job to do. I had a finite amount of capital available. ... This budget attempts to reset the dial on the structure and organization of state government."

She would choose to eliminate the gap for the new fiscal year in part by keeping intact three-quarters of a penny of the one-cent sales tax set to expire June 30, which would put the base tax most consumers pay at 7.5 percent, while still generating $827 million next year. Her budget doesn't extend a temporary surtax on income tax bills for the highest wage earners, the other temporary tax used by the Democratic majority in the Legislature and Perdue with the sales tax to help close shortfalls during the Great Recession.

Perdue said she decided to keep most of the sales tax on at least through mid-2013 to protect the public schools and higher education from massive cuts to teachers, professors and teaching assistants. Her budget would protect those current state-funded positions, but shifted an even greater portion of the payments for noninstructional programs -- school buses, central office and worker's compensation -- to the counties and local school boards.

"North Carolina, as we speak, has 5,000-plus new K-12 students. Somebody has to pay for those students," Perdue told reporters. "Those educators are building are future and it's the most incredibly important economic investment that we can make."

Extending even part of the tax will be a point of contention with GOP legislative leaders, who pledged in the fall campaign to do away with the sales tax.

"Instead of making tough choices to tighten the state's belt, Gov. Perdue is balancing the budget on the backs of North Carolina taxpayers and local governments," Senate leader Phil Berger, R-Rockingham, said in a statement. "This is not how to get North Carolina back on track."

The proposal doesn't contain an effort to revive the video poker industry through heavy regulation. Perdue sounded intrigued for months by the idea, which could have generated several hundred million dollars annually. But it would have faced staunch opposition by a coalition of religious conservatives and liberals.

"I didn't want the next six months, quite frankly when so much is at stake for North Carolina ... to be distracted by this philosophical and moral debate over gambling and other video poker and the lottery," she said.

Perdue took a hopeful tone in her letter to legislative leaders at the front of her two-year budget proposals, pointing out that the state is projected to run a revenue surplus this year and still has its prized triple-A bond rating, a sign of sound fiscal practices that only a handful of states have.

She said the two year budget would place cuts of 7 percent to 15 percent on most state programs compared to last year's recurring funding levels, while the public schools and higher education saw reductions of 4 to 6 percent. Perdue said her budget would eliminate more than 5,200 positions by eliminating funding for 68 "nonessential" programs, reducing funding for 71 other programs and reorganizing or consolidating in 37 locations.

Perdue already announced a government reorganization plan that would reduce 14 agencies and departments into eight, such as shifting departments covering prisons, juvenile justice and the Highway Patrol into one Department of Public Safety.

As previously announced, Perdue said she wants the Legislature to reduce the corporate income tax rate from 6.9 percent to 4.9 percent to make it the lowest rate in the Southeast. But she also wants to end permanently the public school's portion of those corporate tax revenues for school construction.

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.

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