Governor Perdue Signs Final State Budget into Law

Governor Perdue signed into law Wednesday (June 30th) the $19 billion final state budget package that passed the NC House and Senate this week. The House passed the budget with a vote of 66-50 and the Senate passed the budget with a vote of 28-15. This was the first time the General Assembly approved a budget on time, before the start of the state’s fiscal year (July 1st), since 2003.

Upon signing, Governor Perdue predicted that the state budget would create and/or retain 20,000 jobs over the next three years through a small-business tax credit and new transportation funding.

House and Senate Democrats who negotiated the final budget stated that this state budget closes an $800 million budget gap by reducing spending by more than 3 percent. Republicans argued, however, that the state budget spends too much during an economic recession and does not prepare for the potential $3 billion budget shortfall in 2011 when federal stimulus funds will run out and temporary tax increases passed last year are set to expire.

As previously reported, one of the final major provisions remaining for budget negotiators last week involved an anticipated $490 million from Congress for state Medicaid funding. Given the recent stall in Congress to pass the bill containing the state Medicaid funding, budget negotiators had to develop a contingency plan to close the Medicaid funding gap. The contingency plan contained in the final budget will take effect January 1, 2011 if necessary, giving Congress additional time to pass the bill supplying state Medicaid funds. If applied, the contingency plan would first take $30 million from the special fund to pay for disaster relief and $35 million in the lottery funds. After those funds are exhausted, the state would cut Medicaid provider rates by 1 percent, withhold up to $139 million in pension contributions and cut state government across the board by 1 percent, which would total $178 million.

With the budget completed it is likely that the legislative session will conclude next week. Many expect the General Assembly will adjourn by next Friday, July 9th.