Perdue Outlines Emergency Steps to Address Increasing Budget Shortfall

Press Release

Perdue Outlines Emergency Steps to Address Increasing Budget Shortfall

Governor Bev Perdue today signed an executive order to address the increasing fiscal year 2008-09 budget shortfall now predicted by the Office of State Budget and Management (OSBM) to reach $2 billion or more. The order outlines options to address the shortfall. Perdue will provide a more detailed management plan by the end of this week to ensure the state's budget is balanced on June 30, 2009 as required by the state Constitution. "Like most states, North Carolina is being deeply impacted by the global recession," said Governor Perdue. "As Governor, I have a constitutional requirement to balance North Carolina's budget, and I intend to do so responsibly. North Carolina has a track record of responsible fiscal management as demonstrated by our AAA bond rating. That's the same approach we take today." Five main factors have contributed to the increasing shortfall: Withholding is down significantly. Withholding growth for the second quarter slowed to 1.2%, after increasing 2.7% in the first quarter. This slowdown is anticipated to continue for the remainder of the year. Sales growth continues weakness. Sales collections declined 3.6% in the first quarter, followed by a 10% drop in the second quarter. Corporate profits have declined dramatically. Reflecting the deteriorating business climate in the first half of the year, OSBM estimates that annualized collections will decline approximately 25%. Stock market for 2008 was down 38.5%. The declining market will cause a substantial reduction in April payments. Employment continues to fall. North Carolina employment has declined for 8 of the past 10 months and job losses appear to be accelerating.

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