Gov. Beverly Perdue would cut prison spending, but keep the same number of beds.

At a presentation this morning, Budget Director Charlie Perusse said that proposed cuts would mainly be in closing older, less efficient prisons.

He singled out McCain Correctional Hospital, a minimum custody health care center for adult male inmates that was built in 1908.

"Is it worth putting repair and renovation money into facilities that are 80 or 90 years old?" he said. "It's going to cost more to repair them ... then to transition (prisoners) to a new site somewhere else."

He said that the per-day costs at older prisons are often much greater than at newer facilities. Recent prison designs in Pamlico, Nash and Warren counties have also allowed for double-celling of inmates. 

Perusse said that the state would still have the number of beds projected to be needed by the state Sentencing Commission projections.

Major budget cuts are on the way. 

Gov. Beverly Perdue will propose significant cuts in public services next week, as she faces the biggest drop in tax revenue in recent memory, her chief budget advisor said Wednesday.

"The decisions the governor has to make are some the toughest that have had to be made in the last 80 years," said Charlie Perusse, her budget director said at a briefing for the news media, Rob Christensen reports.

There was no hint of how Perdue will balance the budget — whether agencies or programs will be eliminated, prisons closed, state employees laid off, or taxes raised.

"She has charged my office to look line by line at the agency's budget to focus on protecting core services: education, health care, public safety," Perusse said. "There are going to be substantial reductions in our budget."

Perusse said the governor had asked his office to make "strategic cuts," not just across the board reductions, looking whether the taxpayers were benefiting from the program.

Perdue's recommendations are scheduled to be made Tuesday. But aides said she will make a speech Monday outlining her some of recommendations on education.

In her State of the State speech to a joint session of the legislature Monday night, Perdue said she would increase per pupil spending in the public schools.

The good news? The economy may rebound by 2010.

The bad news? State government won't get more tax revenue then.

During a half-hour presentation on the state's economic situation, Gov. Beverly Perdue's budget director, Charlie Perusse, said that the state will likely end this year with a $2.2 billion shortfall.

That would be 10.6 percent below the amount the state budgeted, or 5.9 percent less than it received in the last fiscal year. That would be the largest year-to-year drop in state revenue in the records available, which date to the 1970s.

In the first eight months of the year, the state already has seen revenue drop by $1.2 billion. The second billion is projected through the next four months, in part because April and June are normally big tax-collection months.

Perusse said that the economy would rebound by early next year, but tax collections will lag behind, likely staying flat in next year's budget.

"Employment and the market will stabilize, but it will take six months to a year for revenue collections to actually catch up," he said.

Gov. Beverly Perdue appointed Charles Perusse state budget director.

Perusse has 15 years' experience in state budget and financial management. He served as deputy state budget officer from 2002 to 2008 and was appointed acting budget director in September.

Previously, he worked eight years as a fiscal analyst for the legislature's Fiscal Research Division and spent three years as budget coordinator for the N.C. House of Representatives.

"During this time of revenue shortfalls and impending budget cuts, Mr. Perusse's expertise will be a tremendous asset to my office, to our state agencies and to the people of North Carolina," Perdue said in a statement.

With North Carolina facing a budget gap that could be as high as $3 billion, the state budget director will have a tough task ahead.

State agency heads are being told to cut their budgets by two percent in the current fiscal year as the economic downturn takes its toll on revenues.

A memo from State Budget Director Charles Perusse to state agency heads last week says that "allotments ... will be reduced by two percent of each agency's authorized budget," Ben Niolet and Dan Kane report.

"We are not immune from the nation's economic slowdown and are implementing measures now to give us as much time possible to manage a revenue shortfall should it arise," Perusse wrote.

Kennon Briggs, the executive vice president and chief of staff for the N.C. Community College system, said Perusse met with community college officials last week and told them there would be an across the board cut of two percent, with the possible exception of public schools.

A two percent cut amounts to roughly $400 million from a $21.4 billion state budget lawmakers passed in July. The colleges were told in a system memo released Friday to comply with the cuts by Oct. 17.

A copy of the memo also said that agencies are being asked to hold back an additional one percent of their budgets in case further cuts "are required later this year."