State budget shortfall projected to be $445 million

RALEIGH (WTVD) -- Proposed pay raises for teachers and state employees could be threatened by a state budget shortfall.

A newly released analysis revealed a $445 million gap in state revenue. The outcome was based in part on this year's tax filings.

The General Assembly makes a budget for two years based on expected revenues. Those revenues were cut when state leaders cut state taxes last year.

Then, when leaders come back the second year of a budget, they have to make adjustments. That is what's happening now.

All of this comes at a time when teachers and state workers are expecting the state to pony up and offer pay raises.

Friday night, Gov. Pat McCrory called the outcome disappointing -- saying there's still almost $600 million in reserves to fill the hole, and to pay those raises.

According to the state budget office, McCrory is still weighing several options. A good bit of it all goes back to how much money the state can collect in taxes.

State economists are weighing on that overhaul of the state tax code last year.

"I think the jury is out over the long-run effects of what the General assembly did last year with the tax code," said N.C. State Economics professor Mike Walden. "In the long-run, we may see that it will pump up economic growth. We just don't know, but I'm not surprised to see the initial effects are going to be in terms of lowering tax revenue."

The idea Republicans had in mind with adjusting the state taxes was to put more money into citizens' pockets, which would stimulate the state economy, and, in the process, become more attractive to business which might want to move to North Carolina to create jobs.