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Thursday, July 03, 2008, 10:25 AM
Easley risks replay of 2001 budget crisis By Scott Mooneyham | Capitol Press Association RALEIGH -- The similarities are remarkable. A governor prepares to leave office after helping craft a final state budget. The state's financial ship seems to be moving along at a good clip despite signs of rough waters ahead. Eight years ago, former Gov. Jim Hunt left office with the state's finances in seemingly decent shape. A few months later, Gov. Mike Easley discovered that he had inherited a mess. When the revenue numbers started coming in during the spring of 2001, a budget shortfall that exceeded $1 billion forced Easley to look for money wherever he could find it. He intercepted state pension fund contributions and grabbed local government franchise taxes. In the process, Easley stirred up a hornet's nest. A state employees group sued him. Mayors stood before television cameras condemning him. Fast-forward eight years, and those clouds of financial uncertainty are growing again. Just like in 2000, the legislature and governor should get through the year without too much budget difficulty. A budget surplus expected to be about $150 million for the fiscal year ending July 1 will instead be closer to half that. Still, it's a surplus, not a deficit. But a run of six straight years of modest budget surpluses may well come to an end in the next fiscal year. Just like our individual pocketbooks, the state's pocketbook is beginning to be affected by higher energy prices, inflation and a tighter job market. Even so, neither will be as blindsided as Easley. With legislators likely to vote on a final $21 billion state budget plan this week, the looming economic difficulties are pretty much expected at this point. In 2000, those dark clouds really only began to grow in the final few months of Hunt's last term. A new governor and the next legislature should also be better positioned to handle any financial woes. Easley, in 2001, not only had to meet a $1 billion shortfall, he had to do so after state reserves had been depleted by the state's response to Hurricane Floyd and by taxpayer lawsuits. At the start of the new fiscal year, the state's Rainy Day reserves should be around $800 million. Other pots of money that legislators typically raid during tough economic times, including a building repair and renovation fund, should also be more flush than in 2001. Legislative economists are also being more cautious with revenue estimates used as the basis for the new year's spending. The budget is built on projections that state revenue will grow by 3.5 percent in the upcoming year. Of course, hurricanes do happen. Lawsuits are lost. Economic downturns deepen. And new governors face a new rite of passage.
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