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Tough budget facing legislature as session begins

The state legislative session began in Raleigh this week with the big issue being the budget during tough economic times.

The current fiscal year budget of $21.35 billion is expected to have a shortfall of $2 billion, and Gov. Beverly Perdue has asked state agencies, colleges and universities to cut back on spending. For the first half of the fiscal year revenue is running $625 million below what was expected.

During the session the legislature also has to develop budgets for 2009-2010, which begins July 1, and 2010-2011.

The revenue picture is bleak as the recession is expected to continue into 2010. The state is collecting less in sales and income taxes as well as corporate and franchise taxes. Raising the sales tax and increasing the taxes on alcohol and gasoline could generate additional revenue, noted Rep. Phil Haire, D-Sylva.

According to the Associated Press, the state also has a $780 million rainy day fund that could possibly be tapped. Sen. Joe Sam Queen, D-Waynesville, said the legislature will have to determine what are priorities when developing the budget, and he said education and job creation are his.

Local legislators are also waiting to see what effect President Barack Obama’s proposed $825 billion stimulus plan will have on North Carolina.

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“I’m hoping for solid revenue sharing from the federal side to get us through,” Queen said.

The state’s unemployment rate increased to 8.7 percent in December, the highest since June 1983 when the rate was 9 percent.

“Layoffs continue to hamper many job sectors throughout the state,” Employment Security Commission Chairman Moses Carey Jr. said in a news release.

The unemployment rate a year ago was 4.7 percent.

In December there were 396,846 people unemployed in North Carolina. The national unemployment rate was 7.2 percent in December.

The downward trend in employment in the state is expected to persist for most, if not all, of 2009, and maybe into 2010, according to a report from the Fiscal Research Division of the state Legislature.

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