NC’s shutdown will leave a hole in the state budget. Will big cuts be needed?
Due to falling tax revenues spurred on by the coronavirus shutdown, state lawmakers expect to face a budget shortfall of billions of dollars.
The losses could be as high as $4 billion, said N.C. Senate leader Phil Berger, a Republican from Eden, at a press conference Monday. That would be around 16% of North Carolina’s $25 billion budget — potentially requiring large cuts across state government.
Berger said coronavirus is to blame.
“Before COVID-19 hit North Carolina and our nation we were looking, here in North Carolina, at a significant budget surplus,” he said. “Now, our nonpartisan fiscal staff is estimating that we will have a multibillion dollar shortfall as far as our revenue is concerned.”
With many parts of the economy shutting down and people losing their jobs, plus tourism slowing down, revenue from both sales taxes and income taxes could drop substantially. Berger said state officials should have more details later this week.
So tackling the difficult questions of what to cut, or how to make up the lost revenue, will be an important task for the state legislature, which returned to session on Monday.
Berger said the fallout might not be as bad as it could have been, due to Republican-led efforts in recent years to add to the state’s savings account — which has around $1.2 billion in it.
“Despite our revenues taking a hit, we’ve built up a fairly healthy rainy day fund,” Berger said.
He also said there’s no telling yet exactly how the state’s financial standing will look in a few months, when the new fiscal year begins in July.
“A lot of it’s going to depend on how we close out this fiscal year,” Berger said.
Help from Congress?
One big question is whether to ask the federal government for even more money, to help with the state’s expected budget hole. North Carolina received around $3.5 billion in the federal CARES Act stimulus package for coronavirus relief, although that money is meant for coronavirus relief.
Democratic Gov. Roy Cooper has been pushing members of Congress to approve additional funds to help state, city and county leaders avoid having to make large cuts.
“If that’s not dealt with, then state government and local government are going to have to make significant cuts in core services like law enforcement, like education, like transportation,” Cooper said at a press conference last week.
But on Monday, Berger said such requests might be going a step too far.
“I think what we need in North Carolina is simply — not necessarily more dollars coming into the state, but more flexibility with the dollars that are here,” he said.
Of the $3.5 billion from the CARES Act, state lawmakers have approved a plan to spend around $1.6 billion, with just under $2 billion left over.
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This story was originally published May 18, 2020 at 5:51 PM with the headline "NC’s shutdown will leave a hole in the state budget. Will big cuts be needed?."
