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State workers will undergo 0.5% pay cut
Perdue says that shortfall in N.C.'s April tax revenue makes it necessary
Journal Photo by Lauren Carroll
Gov. Bev Perdue says that the pay cut is necessary to ensure that the state has money to pay its bills for the rest of the fiscal year.
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Published: April 29, 2009
RALEIGH - Gov. Bev Perdue is cutting the pay of all state employees as she tries to close a state budget hole that may be $1 billion larger than previously expected.
Over the next two months, all state workers will get a pay cut that is equivalent to one-half percent of their annual salaries. For a worker making $50,000 a year, that means a total pay cut of $250.
In return, all workers will get an extra 10 hours that they can take off work.
"I don't like doing it," Perdue, a Democrat, said yesterday. But she said that lower-than-expected tax collections in April have forced her hand.
"It is what it is. I'm doing the tough choices."
Perdue said she also will use up to $350 million from the state's emergency-reserve fund and another $400 million in federal stimulus money.
All of the measures are intended to ensure that the state has enough money to pay its bills for the rest of the 2008-09 budget year, which ends June 30. For months, Perdue has opposed the idea of unpaid furloughs for state workers, and her reversal yesterday indicates how severe the state's budget crisis has become.
Over the last few days, as April's income-tax collections came in lower than expected, the governor's economic staff realized that it would have to find an additional $1 billion in cuts or savings --on top of deep cuts to spending that Perdue has already ordered.
The governor said yesterday that she had to make drastic choices, but was comfortable doing so.
"Did I lose sleep over it? No. Did I worry about it? Yes," she said.
The additional federal stimulus money that she is using to help fill the hole is money that she had initially planned to use to help balance the budget in future years. Using it now could exacerbate large projected budget shortfalls in 2010-11 and 2011-12.
Similarly, her reliance on the state's emergency fund will significantly deplete that fund. Its current balance is $787 million, but $250 million has already been tapped to help bail out the state-employee health-insurance plan. Now Perdue may use more than half of the remaining balance.
Her budget director, Charlie Perusse, acknowledged that it a dangerous proposition, given that hurricane season is approaching.
The furloughs for state workers will save the state $65 million, and workers will feel it right away. For most workers, the 0.5 percent pay cut will be deducted from their May and June paychecks. After that, their paychecks will return to normal.
The extra 10 hours of time off can be taken anytime between June 1 and Dec. 31.
Perdue signed the executive order authorizing the furloughs yesterday morning. She then spoke with reporters in Raleigh before going to Winston-Salem, where she spoke to a workshop at Winston-Salem State University on how the federal stimulus is being used.
The State Employees Association of North Carolina expressed disappointment in Perdue's furloughs, but a spokeswoman said that the association realizes that it is a last-ditch effort and that the governor had few options other than cutting salaries this late in the budget year.
The association will fight against further furloughs -- a definite possibility as state legislators work to craft a budget that will cover the next two years.
In recent weeks, some legislators have expressed support for furloughs, arguing that they are a way to avoid widespread layoffs of state workers.
Some legislators have also questioned whether Perdue has the authority, on her own, to order furloughs or whether she needs direct authorization from the General Assembly. Perdue and her advisers said yesterday that they believe she is on firm legal ground, relying on provisions in the state constitution that give her the power to balance the budget.
In Forsyth County, the president of the Forsyth County Association of Educators, Tripp Jeffers, said that the furloughs will hurt teachers, especially because the furloughs are coming on such short notice. But Jeffers also said he understands that the governor must balance the budget somehow and that furloughs are preferable to layoffs.
"Of all the sacrifices, this is probably the most equitable," Jeffers said.
According to the National Conference of State Legislatures, five other states have already enacted furloughs for their employees, and others are considering them.
In North Carolina, the furloughs apply to all state workers except such elected officials as legislators and elected judges. Perdue said that all of the elected officials she has spoken with have agreed to voluntarily take the 0.5 percent pay cut.
For Perdue, who makes $139,590, that means a cut of $697.95
■ James Romoser can be reached at 919-210-6794 or at jromoser@wsjournal.com.
■ Journal reporters Kim Underwood and John Hinton contributed to this article.
The hole gets deeper
Because of lower-than-expected tax collections, North Carolina's budget shortfall for 2008-09 may be $1 billion more than previously thought. Here is how Gov. Bev Perdue plans to come up with that $1 billion by the time the fiscal year ends in June:
• $65 million will come from a 0.5 percent reduction in pay for all state employees.
• $300 million to $350 million will come from the state's emergency reserve fund.
• $400 million will come from federal stimulus money that Perdue had previously been saving for future years.
• $185 million to $235 million will come from other special funds and trust funds.
Gov. Perdue's furloughs
All state employees, including public-school teachers, will have a 0.5 percent cut in pay for the last two months of the fiscal year and, in exchange, will get 10 hours of flexible time off. Here is how much money workers will lose at various pay levels:
Annual salary Pay reduction
$30,000 $150
$50,000 $250
$75,000 $375
$100,000 $500
Perdue's salary Pay reduction
$139,590 $698
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