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December 30, 2008
Closing the gap
Governments around the nation and in our state are looking at budget gaps for the upcoming fiscal year. The gaps result from the recession's slowing revenue growth at the same time that our economic downturn has increased calls for help from many citizens. How do our elected officials deal with this gap in spending needs over revenue availability?
Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:
"You know, we're reading more and more about this problem, and it happens every time there's a recession. We're reading, for example, about cities and county commissions, school boards and, of course, the state all having problems with their budgets because of exactly what you said, that revenue growth is slowing and spending needs are still there, so there's a gap, and how do you close the gap? Well, of course you can close it in one of two ways or a combination. You can do it on the spending side, where you try to pare spending or plan spending. Now the easiest way to do that, of course, is what's called across the board cuts. You simply tell all departments that they're to cut 5 percent or 7 percent or 10 percent. That's the easy way to do it. Of course, another way would be to go in and get into the minutiae of all those departments and try to prioritize and cut those programs that you feel have higher priority less than you cut the programs that have lower priority. But that does require you to prioritize, that's a very hard thing to do in the public sector. The other way you can try to close the gap is to bring in more revenue, but the problem there is that typically during a recession, you don't want to tax people more because you want people actually to have more money to spend. So this is a very, very difficult period of time for our elected officials to go through. It's not the first time they've been in this position. It's not the last time they will be in this position, but I think this is really when they do earn their pay."
Posted by Dave at December 30, 2008 08:00 AM