N.C. Job Growth Surges in March
Karen Rives, News & Observer
April 17, 2004

Gov. Mike Easley has money in his pockets for the first time since he took office three years ago.

Easley, who is busy putting together his new spending plan for the fiscal year that begins July 1, should end the current year with at least $190 million in the bank, General Assembly number crunchers say.

It's a far cry from the half-billion-dollar surpluses of the late 1990s, but the cushion should give the governor some wiggle room to balance next year's budget.

Easley and lawmakers enacted the $15.5 billion spending plan for the coming year last June, but they must revise it this spring -- and they have millions of dollars of priorities they'd like to fund.

"I expect that that $200 million will generate $2 billion in requests," House Democratic Speaker Jim Black said Friday. "Everyone's going to see it and say, 'Hey, this is the year. We've been waiting for this for a long time.' "

The surplus is likely to change the rhetoric at the General Assembly, where lawmakers are sure to start looking for new or neglected programs to give money to when they reconvene May 10. The improved economic outlook also will influence the campaign trail, where Republican candidates for governor have hammered Easley with accusations that he has mismanaged the state's finances since assuming his duties in 2001.

Easley had been in office no more than a few weeks when he faced his first of three successive budget emergencies. At its worst, two years ago, the budget crisis dropped a $1.6 billion shortfall in the governor's lap. Even last year, as the economic downturn began to stabilize, the state collected $221 million less than predicted.

Revenue, not rebound

The $190 million surplus projection this year comes from legislative economist Dave Crotts. The Easley administration will not release its own projection of the revenue outlook until next week, spokeswoman Cari Boyce said. A revised spending proposal is also likely to come out of the Governor's Office next week, Boyce said.

Crotts stressed that the surplus is not the sign of a major economic rebound. Nearly half the surplus comes from higher-than-expected revenue receipts in April -- a critical month in which most people pay their individual income taxes. But April is a notoriously volatile month when it comes to such receipts, Crotts said.

Also, the legislature and Easley have a growing list of priorities that lawmakers are likely to add to the budget, Crotts said.

Among the possibilities:

* Giving pay raises to state workers and teachers.

* Adding to the repair and renovation fund.

* Increasing teacher bonuses.

* Replenishing the rainy-day fund.

* Covering university enrollment increases.

* Accounting for Medicaid inflationary increases.

* Expanding Easley's smaller class-size initiative to the third grade.

Other priorities include four major research initiatives for the University of North Carolina system, including a cancer research center at UNC-Chapel Hill and a heart and stroke center at East Carolina University. The likely plan would be to borrow the money for those, Black said -- although Easley sent lawmakers a stern letter last week warning them not to get ideas about too much spending or borrowing this year.

"We'll be talking to the governor about what he means about borrowing that he's not in favor of," Black said. "If we did these projects, it would be economic development. It would be creating jobs."

Black added that he'll support the projects only if all four are funded. He is from Mecklenburg County, home of UNC-Charlotte, where one of the research centers is proposed.