General Assembly returns today

General Assembly opens today amid estimates that state faces a shortfall expected to reach $2 billion

Credit: Journal Graphic

By: By James Romoser | JOURNAL RALEIGH BUREAU
Published: January 28, 2009

State legislators will return to Raleigh today to begin a new session of the General Assembly that will be defined by money -- and the lack of it.

Even veteran legislators say they have never seen budget problems as dire as the ones they face this year.

"Suffice it to say, the fiscal problems are serious. They are likely to deepen as we go along," said state Rep. Joe Hackney, D-Orange, who is expected to be chosen today by fellow legislators for his second term as the speaker of the N.C. House.

The national recession has diminished state revenues, which are now expected to fall about $2 billion short by the end of the state's fiscal year on June 30. That potential hole represents 10 percent of the total state budget, and to cope with the declining revenues, Gov. Bev Perdue has ordered immediate, across-the-board cuts to state spending.

Now Perdue and the newly elected legislature turn their attention to the task of crafting a new state budget to carry the state through the next two years, when revenues are likely to dwindle even further.

So far, Perdue and most legislators say they will look for ways to cut spending and improve efficiency rather than increasing taxes, although they also say that all options are on the table.

State Sen. Marc Basnight, who is expected to be chosen today for his ninth term as leader of the Senate, has suggested raising taxes on cigarettes and alcohol. But even substantial tax hikes on those products wouldn't raise nearly enough money to make up the projected budget gap.

State legislators are also counting on help from the federal government. The current version of the federal stimulus package would give the state nearly $1 billion for transportation projects, and more cash on top of that for other needs.

A separate financial emergency is brewing in the State Health Plan, which provides health insurance to state employees and is facing a shortfall of its own.

Legislators are considering dipping into the state's rainy-day fund this year to make sure that the plan will be able to cover all of its claims.

At noon today, the gavel will fall, and these and hundreds of other issues will be on the table. Even though it's a new term, the General Assembly will look quite similar to the legislature of the previous two-year term. The majority and minority leaders in both chambers haven't changed, and Democrats have retained their sizable majorities in both chambers.

The biggest change is the new governor, Perdue. She was an influential state legislator earlier in her career, and many people expect her to work more closely with the legislature than her predecessor, Mike Easley, usually did.

■ James Romoser can be reached at 919-210-6794 or at jromoser@wsjournal.com.