South By North Strategies, Ltd.

An article in The American Prospect explains how North Carolina balanced its budget  for fiscal year 2010 and lays out the challenges facing the state next year.

“We’ve never had a shortfall of that size [25$ of the general fund] in our state,” says Meg Gray Wiehe, public-policy analyst for the North Carolina Justice Center. “But the cuts could have been much, much worse than what ultimately ended up happening.”
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That’s because North Carolina’s Democrat- controlled Legislature decided against getting slash-happy. Instead it balanced the budget through three roughly equal measures: stimulus funds, cuts (Medicaid reimbursement rates and classroom size for fourth-grade through 12th-grade both suffered), and a temporary tax package.
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Beyond the immediate crisis, the temporary tax increases have opened up the political space for a broader reform of North Carolina’s tax system, which relies on taxes that weigh heaviest on the poor. The budget includes language requiring the financial committees of both houses to meet during the off session to come up with recommendations for reforming the state’s outmoded tax system, which largely dates back to the 1930s.
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“It’s a conversation we’ve been having for 50 years,” Wiehe says. “Now more than ever the political will to change it seems to be there.