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June 11, 2009

The worst budget gap

Legislators in North Carolina are grappling with the state budget now. Of course, their biggest problem is that revenues are coming in way below projections, creating a budget gap that must be closed. How bad is the gap? Listen

Dr. Mike Walden, North Carolina Cooperative Extension economist in the College of Agriculture and Life Sciences at N.C. State University, responds:

"We're talking about the budget gap for what's called the general fund, which is the biggest fund that the state controls. What's happened, of course, is that the state planned on expenditures for this year. A couple of years ago, they also planned or projected what revenues were going to be to match those expenditures. The revenues have not come in at the rates expected because of the recession, and that has created this budget gap, which must be closed. But I think it's very important to put this budget gap that our legislators are dealing with now in some perspective. If you go back to recent recessions - for example, 1981 to 1982 - we had a 9 percent budget gap; 1990-91 recession, 8 percent budget gap; the recession in 2001, an 11 percent budget gap. The estimate for the budget gap this fiscal year is 15 percent. So I think that indicates how very difficult the problem our legislators are dealing with is when you have a 15 percent budget gap, much bigger than the gaps in recent decades."

Posted by Dave at June 11, 2009 08:00 AM