Budget Cuts: Round Two

When asked to give back more than $ 1 billion from this year’s budget, state agencies returned unspent salaries, turned over unanticipated income from service fees and, in one case, dipped into a well-padded reserve account, newly released budget documents show.

All of which raises this question: Can they do it again?

Gov. Mike Easley and leaders of the General Assembly say all of North Carolina must brace for more deep cuts to the state budget next year. But reductions to this year’s budget were not as painful as some had warned they would be, according to the latest documents. That leaves some to wonder whether the worst-case remedies on the table for next year — including hundreds of layoffs and millions in program cuts — can also be avoided.

“Some of this was just fear tactics, to throw out taking away support for mental health or support for teachers,” said Jonathan Hill, head of the North Carolina chapter of the anti-tax group Citizens for a Sound Economy. “We all want health services to be adequate, and we certainly want education to be as good as it can be. But I think there’s just a huge amount of room in the budget, if they would just eliminate unfilled positions.”

That’s exactly how most of the savings were accomplished this fiscal year.

Easley asked most state agencies to reduce current-year spending by 7 percent to close a projected shortfall of $ 1 billion. The documents show that 12 of 26 agencies met most of their required reductions simply by leaving positions open and returning unspent salaries and fringe benefits.

In addition, four agencies were able to turn over extra income from fees and other sources. And the General Assembly was able to cover all of its savings target this year — $ 2.75 million — by dipping into its $ 16 million in reserves.

“My take on it would be that state agencies have stepped up to the plate and they’ve done a marvelous job of managing their budgets,” said State Budget Officer David McCoy, speaking of belt-tightening in the current year.

The Department of Labor held some jobs open for just one month to generate some of the savings it was asked to produce this year, according to budget documents. The department was ordered to return just over $ 1 million from the $ 15.5 million in state funds it was appropriated for the year ending June 30.

The State Board of Elections found all the necessary savings

— $ 95,451 — by reducing such operating expenses as travel and purchases of supplies, furniture and printing services. “Because these are one-time reductions,” the board’s budget report states, “there should be no adverse effects to the responsibilities of the agency.”

The Department of Environment and Natural Resources was ordered to return $ 11.1 million from its $ 158.9 million appropriation. Fifty-nine percent of that savings will come from lapsed salaries, and 35 percent will come from such office expenses as travel reductions and delays of computer system improvements, according to the documents.

“There’s been a good deal of work done by the divisions to make the impact as acceptable as possible,” said Dempsey Benton, deputy secretary of the department. “There have been a number of instances where we’ve had vacancies, and work is not getting done in some areas, but I think the divisions met our budget responsibilities in a way that has a minimal impact on the staff that we do have.”

Only one agency, the office of Lt. Gov. Beverly Perdue, eliminated any permanent, filled positions. Perdue, who was asked to cut just 4.4 percent because her office is so small, laid off two of the office’s 10 employees. The two, both $ 40,000-a-year policy directors, did not find positions elsewhere in government, according to Perdue’s spokesman, Derek Chernow.

That’s not to say that some of the other cuts to the current year’s budget were devoid of real impact, department officials say.

The Department of Cultural Resources cut more than $ 1 million in state aid to local libraries — money that has forced libraries across the state to reduce hours and staff, budget documents show. The department also eliminated 142 temporary jobs at historic sites across the state.

“We are already so bare-boned, and our funding is not that big for the reach that we have,” said Brenda Follmer, spokeswoman for the Department of Cultural Resources. “I would say that it’s been pretty painful.”

The Department of Health and Human Services canceled $ 10 million in contracts to nonprofit groups, which provide services to such needy groups as the disabled, low-income children and the mentally ill.

And this will be the third year in a row in which the Department of Agriculture and Consumer Services has had to delay $ 130,000 in equipment purchases as a result of budget cuts and reversions.

The equipment, for analyzing farmers’ soil samples at the department’s agronomics lab, is necessary to help deal with a backlog that ran as long as 14 weeks earlier this year, according to state Agriculture Commissioner Meg Scott Phipps.

“It has a significant impact in our labs,” Phipps said. “At the veterinary lab, where equipment is already outdated, things are being held together with duct tape.”

Even using the pool of unspent funds from lapsed salaries is not universally a painless exercise, some department chiefs say.

In the Division of Water Quality of the Department of Environment and Natural Resources, five of 13 positions responsible for issuing discharge permits to animal operations and municipal waste facilities are vacant, according to department spokesman Don Reuter. That means permit-seekers wait longer — and state workers do more work, Reuter said.

“We’ve got people in some of these units doing the work of two and three people,” Reuter said. “Just because the vacancy is open doesn’t mean the work goes away.”

Gwynn T. Swinson, secretary of the Department of Administration, said her department has a “dire” need to fill vacant positions to perform such duties as state property inventory and even maintaining the flower beds in downtown Raleigh.

For some departments, the price of 7 percent cuts was considered so steep that Easley allowed them to cut less.

The Department of Correction will return a little more than 5 percent of its state appropriation by the end of the year, McCoy said, because deeper cuts would raise prisoner-to-staff ratios to an unacceptable level.

The Department of Juvenile Justice and Delinquency Prevention was allowed to exempt from cuts the cost of educating its wards, and the Attorney General’s Office exempted its expenditures on post-Sept. 11 security measures.

State officials don’t dispute that North Carolina was able to absorb cuts to the current year’s budget without a devastating impact on services. And Easley has made clear that he hopes to do the same in the new budget.

“The governor’s goal is protecting the classroom and maintaining a level of public service,” said Dan Gerlach, a budget adviser to Easley. “We know that someday the recovery will get here. So the question is how do we maintain a quality of service until we get to that recovery.”