NC 2012: Where do you find $3 billion?

Gov. Bev Perdue said yesterday that there would be a major announcement after next month's elections about "about merging, eliminating, consolidating pieces of state government.”

The idea is to help close some of the state's coming budget gap, which is expected to run between $3 billion and $4 billion next year as stimulus money dries up and temporary tax increases, put in place a couple of years ago, expire.

But what does it really mean to cut $3 billion? Well, that's roughly 14 percent of the current state budget. But let's go a little deeper, though I want to be clear that this is all back-of-the-envelope math.

"Merging, eliminating and consolidating" doesn't save much money unless you fire people. So how many state employees would you have to lay off to save, say, $1 billion?

The average salary for state employees is $41,723, according to the state office of personnel. That doesn't include K-12 teachers or some university personnel, but we'll set that aside for a moment, remembering that the governor and the legislature are going to look to cut K-12 education last.

Add in another 20 percent for benefits and you get $50,068 per employee. So, to save $1 billion, you'd need to layoff 19,972 people, or 21 percent of the 93,217 total state employees listed on that government employee statistic website.

That would be the equivalent of nearly eliminating the state's department of corrections (see agency by agency employee numbers here), and you'd still have at least $2 billion left to cut to keep from raising taxes.

Now, I wrote about North Carolina's fiscal 2012 budget for The Winston-Salem Journal in August. My thesis was, and remains, that there's a really good chance the governor and legislature are going to extend those temporary tax increases, which amount to an extra penny-on-the-dollar in sales taxes and 2-to-3 percent income-tax surcharges on people making more than $100,000 a year.

Would it be popular? Of course not. Neither would firing 20,000 people. But the tax increases bring in an extra $1 billion or so each year. And the governor didn't give me a firm yes or no on this issue in August, though she later told the Associated Press that the sales tax increase, at least, wasn't in her budget "at this point in time."

But it wouldn't be the first time the General Assembly has left "temporary" increases on the books to make ends meet. From my story:

In 2001 the General Assembly bumped the state sales tax up half a penny, an increase that was supposed to be rolled back two years later. But that increase stayed on the books until 2006, when it was cut in half.

The fourth-of-a penny increase that remained is still in place today

Another thing to look for may be privatization of the state's liquor stores. There are 405 of them in North Carolina, but, according to the North Carolina Alcoholic Beverage Control Commission, the state doesn't own the buildings, or the liquor.

The system turns a profit each year as is (see third report from top), and, though there's been some talk of determining what kind of cash infusion North Carolina would reap by privatizing and selling licenses, that number is as yet unknown, according to spokespeople for the ABC, the legislature's Program Evaluation Division and state Rep. Ray Warren, who chairs the House oversight committee on ABC.

Which brings me to another big ticket savings item: Employee furloughs. Georgia, where I was a reporter for 10 years before moving to North Carolina in May, went this route repeatedly in balancing its budget the last two years. And it estimated it would save $33 million for each day it furloughed K-12 teachers. I can't seem to find or remember the per-day savings for furloughing all state employees, but obviously we're talking big numbers.

My point in all this? I guess it's that $3 billion is a lot of money. Remember that when a politician promises to slice up state government and save you money, and ask which 20,000-person state department he or she plans to eliminate.

Oct. 15 update: Mark Binker, The Greensboro News & Record's man in Raleigh, has come to much the same conclusion:

So voters, when a candidate says they can balance the budget by cutting "waste, fraud and abuse," the question is can one-fifth of the state budget -- 20 percent -- be waste fraud and abuse? Despite the missteps we've seen with items such as the crime lab, that'd be a hugely cynical view of government and one that's not altogether accurate.