Cut state spending, but cut wisely, too

Gov. Mike Easley has the right idea about the state budget as North Carolina faces a deepening economic slowdown and a significant decline in state revenues for such services as schools, prisons and health care. He surely remembers the pain the state faced when he took office in 2001 and had to make a series of adjustments in the state budget – including raising sales and income taxes.

But in cutting state spending in every agency, officials must be careful to avoid cuts that will fall heaviest on those least able to handle it. And the state must avoid cuts that will cost the state more money than it will save.

In September Easley ordered state agencies to cut spending by 2 percent. In October he increased that to 3 percent. After reviewing quarterly sales and income tax revenue figures last month, he quietly revised that trim to 5 percent.

We think the governor was prudent to make that cut, because state officials are expecting a shortfall of anywhere from $1.2 billion to $1.6 billion. It could even balloon to $2.6 billion when the costs of fixing an ailing state employees' health plan and paying for a raise for teachers in the next budget are figured in.

“I said, ‘Let's tell everybody to hold five (percent) until we figure out what's going wrong,'” Easley told the Observer's Mark Johnson last week. In a $21 billion state budget, a 5 percent cut on an annualized basis would save about $1 billion. The state is also thinking of tapping $287 million from the state's Rainy Day Fund.

That sounds prudent. The state cannot spend more than it takes in. But as the News & Observer's Thomas Goldsmith pointed out Monday, the cut may also mean a hit on the elderly and those in mental health programs. That's an unconscionable burden on citizens least able to care for themselves. The cuts include a $2 million reduction for a range of social services, including meals delivered to the elderly at home and in-home assistance so the elderly can avoid tax supported stays in nursing homes, the N&O reported. The cut directly affects low-income women who average about 77 years old, the newspaper found. The cuts also would affect senior centers, transportation services and adult day health programs and day care centers.

Spending cuts may cost more than they save, says Elaine Mejia of the N.C. Budget and Tax Center. Some programs such as Medicaid and the Child Health Insurance Program bring in about $2 for every dollar the state spends. So cuts in those programs would result in a greater loss.

The revenue shortfall and budget gaps should prompt a substantive conversation on state priorities, including whether it's finally time to devise a new revenue system that more closely meets the state's needs. But in the short run, state budget officials must take another look at their planned cuts – and use a rapier rather than a battleaxe.