RALEIGH (AP) ó Gov. Beverly Perdue on Tuesday ordered a pay cut for all state workers in May and June equal to a half-percent of their annual salary as shrinking tax collections force her to find about $1 billion more to close a widening gap before the June close of the budget year.
Perdue signed an executive order directing the flexible furloughs her administration estimates would save $65 million over the two months. That means state workers earning $30,000 a year could expect to see their monthly May paychecks cut by $75, followed by another $75 cut in June. In return, workers will get an extra 10 hours of flexible time off.
“I think it’s hard for them to be told this morning that that they have to give up 150 bucks, because if they’re like most North Carolinians they budget so finely around their obligations,” Perdue said. But, she added, “this is all I can do.”
The governor also planned to use $400 million in federal stimulus funds earlier than expected, to avoid layoffs. In addition, she wants to raid the main state reserve fund for up to $350 million and tap about $200 million from some of the other special-purpose funds that set aside money for such projects as highway building and land purchases.
The governor said she was acting under her constitutional obligation to balance each year’s state budget. The current budget year ends June 30.
“It’s something she has no choice about,” said Senate leader Marc Basnight, D-Dare.
Senate Minority Leader Phil Berger, R-Rockingham, agreed that salaries were probably among the few places to cut spending so late in the fiscal year, but he noted that the furloughs were only a tiny part of Perdue’s solution to closing the budget chasm.
“There ought to be some more cost savings than just $65 million,” he said. “I think it’s time we’re going to have to get serious to really cut spending.”
The cuts come on top of moves Perdue had already taken to close a $2.2 billion gap between income and planned state spending that greeted the governor when she took office in January. Perdue has addressed that gap by cutting state agency spending by up to 9 percent, and tapping at least $550 million from reserve funds.
A union representing state workers was resigned to the fact that Perdue had few places to cut in the final months of the budget year other than salaries, State Employees Association of North Carolina chief legislative lobbyist Ardis Watkins said. The union would continue fighting proposals that would make it easier to furlough state workers in the future, she said.
Although Perdue cannot impose salary cuts on elected officials such as lawmakers and judges, she said had asked Chief Justice Sarah Parker and legislative leaders to voluntarily take the pay cuts. Perdue said she would cut her own pay. House Majority Leader Hugh Holliman, D-Davidson, confirmed legislative leaders would accept pay cuts. The state constitution bars governors from changing the salaries of elected officials during their terms.
“Everybody is willing to give up something of their salary,” Perdue said.
Perdue said she decided on an across-the-board salary cut after legal advice that it was the option most likely to sustain a legal challenge. Her office said she would ask the General Assembly to pass legislation specifying that the pay cuts would not affect longevity pay, retirement or other benefits.
While the cuts to employee salaries are scheduled for May and June, for administrative reasons workers will be allowed to take their compensating time off between June and the end of December, State Budget Director Charles Perusse said.
The federal stimulus money Perdue will spend in the next two months comes from a fund designed to allow states to avoid deep layoffs as they confront budget shortfalls. The governor’s proposed budget for the two years beginning July 1 recommended spending the $1.4 billion evenly over the two year span. Instead, Perdue decided Tuesday to spend $400 million of that now, Perusse said.
Perusse said the total spending gap for the current budget year could wind up between $2.8 billion and $3.2 billion, and the eventual amount would sway how much of the state’s reserve funds are used. But Perdue wants to set aside about $200 million to cope with emergencies like a summer hurricane or disease outbreak, Perusse said.
The belt-tightening is likely to continue at least through the end of this year, Perusse said, before employment picks up in the second half of 2010.
Basnight, Berger and House Speaker Joe Hackney, D-Orange, said it’s clear that with Perdue using up most of the money in reserve funds, legislators will have to cut dramatically to pare a spending gap in the year beginning July 1 that Hackney estimates will be about $4 billion. Perdue indicated she knew tough times were still ahead.
“It isn’t over now. Don’t you all think it’s over now because we’ve got a long way to go before North Carolina has fully recovered,” she said.