Budget deficit

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House Republicans had a press conference today to explain their budget proposal. A number of questions focused on what happened to the $2.4 billion shortfall discussed earlier this year. The actual deficit that needs to be filled is $1,998,057,612.

Here's the score: the continuation budget for FY2011-12 starts at $20.8 billion including adding back in the one-time cuts and federal stimulus spending in FY2010-11. Revenue estimates since the governor released her budget had continuing revenue up to $18.8 billion: a $2.0 billion gap. The governor then added about $400 million of spending for Medicaid and education enrollment growth. This made the gap $2.4 billion and pretty much everybody ran with that number, even though it was not the actual structural shortfall.

The governor then extended 3/4 of the one-cent sales tax for two more years and counted $323 million in unreserved fund balances to be available, filling $1.1 billion of the gap. She also cut a net $900 million in spending, for which she claimed a $1.3 billion cut. She balanced the budget with a formula of 54% temporary tax hikes and 46% spending cuts. Almost all of the structural gap of $933 million in FY2012-13 is closed with the temporary taxes, meaning that the governor actually anticipates the sales tax hike becoming permanent, or leaving it to Gov. McCrory to sort out.

The House budget uses lower spending to fill 81% of the gap in FY2011-12 and 106% of the gap in FY2012-13.

Joseph Coletti / Senior Fellow

Joe Coletti is a senior fellow at the John Locke Foundation focused on fiscal policy issues. He previously headed the North Carolina Government Efficiency and Reform initiativ...

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