Legislative Conference Speakers Worry About the Budget
Lawmakers Look for Ways to Trim State Spending

Already aware that projected revenue for the second year of the biennium could be $450 million less than was expected when lawmakers wrote the two-year budget last July, conference speakers had more bad news. Revenues through 10 months of the current fiscal year are $91.7 million below target, meaning legislators probably will have to first figure out how to balance this year's budget before they can tackle next year's looming fiscal crisis.

“We're starting out in the hole on the budget,” House Speaker Jim Black (D-Mecklenburg) said at the conference at the McKimmon Center in Raleigh, which was attended by about 400 people. “We're $90 million in debt right now just for this year,” Senate President Pro Tem Marc Basnight (D-Dare) said. Read the complete text of Speaker Black's remarks.

It's well known what's driving up expenditures in the state budget -- paying out $1.2 billion to refund illegal intangibles taxes and taxes on retirees' income, coming up with $836 million in Hurricane Floyd relief money, raising teacher salaries to the national average, expanding Smart Start into all 100 counties, and other investments in education and the environment.

Funding new money to pay for such expensive and desirable programs hasn't been a problem in recent years, when the state General Fund usually piled up surpluses of $1 billion or more on revenue growth rates averaging 8 percent to 10 percent. But growth in revenues this fiscal year is coming in at around 6 percent -- still healthy but not enough to support current spending plans.

“The commitments we made last year -- teacher salaries, Smart Start and others -- are coming due,” Basnight said. So belt tightening is in order, he and other speakers agreed.

“This year, we don't have any money to cut taxes substantially or to launch bold new initiatives,” Black said. “We can't do any number of things that are going to cost money.”

“There will be virtually no non-recurring money in the budget (at yearend), and we usually have $400 to $500 million to spend, usually on construction projects,” State Budget Director Marvin Dorman warned.

The difficult task facing the General Assembly, the legislative leaders said, will be identifying budget cuts to make income match outgo. But closing the gap to finish out the current year shouldn't be too difficult, Budget Director Marvin Dornam said. He pointed out that the $91.7 million shortfall is just 0.04 percent of projected revenues.

Coming up with cuts to balance the budget for the year starting July 1 will be more difficult, he and others said. Legislators were waiting to see how Gov. Jim Hunt proposes handling the balancing act when he submits his proposed budget to the General Assembly.

The NCCBI Legislative Conference, which traditionally marks the beginning of a new General Assembly session, allows the business community to hear directly from legislative leaders how they view the issues. The evening before the conference, NCCBI welcomed more than 100 legislators and other state officials at a reception held at Raleigh's new sports arena. A total of 600 to 700 people, including the legislators, attended the reception.

The most encouraging news coming from the conference was the unanimous view expressed by the speakers that the General Assembly should pass legislation asking voters to approve a $3.1 billion bond issue for higher education facilities needs. Addressing the capital needs of the UNC System and the community colleges is one of NCCBI's top legislative priorities this session. The association has agreed to take a leading role in obtaining voter approval of the bond issue.

NCCBI's proposal was warmly endorsed by the legislature's Joint Select Committee on Higher Education Facilities Needs during a May 3 meeting. The bond issue would give the UNC system $2.5 billion for capital needs and the community colleges $600 million. Black and Basnight has indicated that the House and Senate will vote on the package within a few days.

Acceptance by legislative leaders of the higher education bond package culminates three months of work by NCCBI. In February the association convened a group to examine higher education bonds, inviting representatives from the UNC System and the Department of Community Colleges, including the presidents, governing board members and key staff people. After several meetings and considerable discussion, the NCCBI-led group agreed to encourage the Joint Select Committee on Higher Education Facilities Needs and the General Assembly to place a bond issue of between $3.1 billion and $3.4 billion on the fall ballot.

While this amount will fund less than half of the needs identified by the systems' consultants, NCCBI believes the amount can be supported by a majority of voters and that it will not cause a tax increase. State Treasurer Harlan Boyles agrees that a tax increase would not be needed to pay off the bonds if the General Assembly sets spending priorities. NCCBI has told legislative leaders that it is ready to assume a leadership role in the fall campaign to make sure the bond issue is approved by voters, much as the association did in 1996 in obtaining passage of the $2.75 billion bond issue for schools and roads.

Another surprise was when House Speaker Black departed from his prepared text and endorsed NCCBI's call for a constitutional referendum on session limits. In his text, Black says: "I may decide that we need a constitutional amendment to limit the length of sessions. But I'm not ready to take that dramatic step yet." But at the podium he turned to NCCBI President Phil Kirk and said "bring me the votes and we'll pass session limits." And he said NCCBI can count on his vote. "They have one [vote] this year that they didn't have last year," said Black, who told the group he would bring the issue to the House if there are enough votes to pass it.

Blask said NCCBI should only mount an aggressive campaign to pass session limits if it's sure it has the votes. A minimum of 72 votes are needed to pass a constitutional amendment in the House. "If they don't have but 50 votes, there's no need to get into that."

Black said he changed his mind after trying to recruit Democratic candidates for House seats this year. Some people he contacted said they didn't want to run because they were afraid of how much time they would have to spend in Raleigh. The Senate last year passed an amendment sponsored by Sen. David Hoyle, D-Gaston, to limit long sessions to 135 calendar days and short sessions to 60 calendar days; the legislature could enact one 10-day extension. The proposal also includes a second constitutional amendment extending senators' terms from two years to four years; Black said that would probably be changed to include House members. In June 1982, voters rejected a proposal for four-year legislative terms by a margin of 522,181 to 163,508.

Here are some quotable quotes from speakers at the NCCBI Legislative Conference:

House Speaker Black: “This year, we don't have any money to cut taxes substantially or to launch bold new initiatives. That does not mean we cannot look ahead. We can and should begin talking about our long-range priorities. While our revenue picture looks brighter a few years down the road, there will never be enough money to do all that we want to do. We simply must agree on some common goals. One of my priorities for the future is to implement the recommendations of the Task Force on Rural Prosperity. I have supported the work of that task force from the beginning, and have made a commitment to support the group's efforts. But we can't do it all this year. We can't overhaul the mental health system this year, either. We can't do any number of things that are going to cost money.”

Senate President Pro Tem Basnight: “There will be no tax increase to balance the budget.”

House Appropriations Committee Co-chair David Redwine (D-Brunswick): “There will be no credit balance (in the budget) this year, so there will be no money for the Rainy Day Fund, unless we appropriate it. So, we eagerly await the governor's budget.”

Joint Legislative Education Oversight Committee Co-chair Gene Rogers (D-Pitt): You've already heard about our funding situation. It's bleak. We will be working hard just to maintain what we have.”

Joint Legislative Education Oversight Committee Co-chair Howard Lee (D-Orange): “I feel very good about the higher education bonds. With your help we can pass it.”

Joint Select Committee on Higher Education Facilities Needs Co-chair Tony Rand (D-Cumberland): “It would be a shame if we achieve the goal of first in the nation in education by 2010 in the public schools and our university system is collapsing around our ears.”

House Minority Leader Richard Morgan (R-Moore): “I'm confident the $400 million to $500 million shortfall (projected in next year's budget) can be erased with spending reductions.”

Senate Minority Leader Patrick Ballantine (R-New Hanover): “There is no revenue shortfall this year. Revenues are coming in at 6 percent over last year. We have a spending problem.”

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