The Coming Fiscal Crisis in North Carolina

According to this a.m.'s News & Observer, the state of North Carolina faces a $1 billion budget shortfall in the fiscal year beginning July 1st, a hole that Mike Easley's much touted state lottery could not begin to fill. A lottery, which could not be enacted and trotted out in time to help with fiscal 2005, is projected to bring in between $325-$425 million per annum, not even half of what's needed. And the quick fixes of the last budget cycle -- a half-cent rise in the state's sales tax and the half-percentage point increase on top income earners -- are set to expire this year.

The state legislature's options are severely limited, given the general gutlessness that runs like a virus through the political leaders of both parties. The Democrats now control both houses of the state legislature and the governor's mansion, which means they are in a roughly analogous situation to the national Republicans. They'll have no one to blame but themselves (not that they'll ever accept blame, not in a million moons!).

The News & Observer forecasts several possibilities for revenue-raising (other than Easley's lottery), some of which will have built-in sources of high dudgeon among large sectors of the state's population:

a. An increase in the cigarette tax. North Carolina's is the second-lowest at 5 cents per pack. If lawmakers were to match Virginia's rate of 30 cents a pack, the state could gain as much as $175 million a year.

b. Higher beer and wine taxes, currently a nickel for every 12 ounces. Each additional penny increase would bring in another $18.6 million.

c. Extend the half-penny sales and half percent income tax increases -- the ones set to expire this year -- and keep a state estate tax (which the Republicans are itching to kill): $500 million.

d. Cut the state budget by $1 billion, which means that education, health care, social services generally, etc. would take crippling hits.

Another unknown adding to the anxiety is just what other costs the Bush administration will successfully shove downward onto the states, while adding its own layer of new salt to the Great Red Sea of their deficit-loving form of less-government-is-better-except-when-it's-not logic.