State revenues are 1 percent lower than projections, according to a report by the legislature's Fiscal Research Division.

Revenue collections through the end of September, the first quarter of the fiscal year were $45 million lower than a $4.2 billion target, according to the report prepared by Barry Boardman, an economist for the legislature.

It's very early in the fiscal year and the most important indicators of whether the state can make its budget won't come until the spring. But the early decline suggests that the state's recovery from the recession will be a slog.

Revenue is down, generally speaking, because consumers are spending less and workers and corporations are making less money. Those declines mean the state is collecting less tax revenue.

Other states are doing much worse, according to the National Conference of State Legislatures. North Carolina's projected loss in tax revenue is currently less than South Carolina, but higher than Virginia and Tennessee, according to the NCSL.

A new law that raised age requirements for kindergarten will save the state $50 million in education spending next year.

That's just about all the good news about the state's public education budget.

Lawmakers attended a briefing on education spending Wednesday and there was plenty of bad news. The projected budget deficit next year, as much as $2 billion out of a $21.5 billion budget, will require a hard look at the few areas of education that the state can cut -- teacher salaries and class sizes.

Education accounts for some 54 percent of state spending. The bulk of that money, $8.19 billion, was spent on public education in the current fiscal year. 

The state allots money to schools using a formula based on attendance. The number of children in schools has grown steadily since at least 1999. The coming year will be the first time the attendance number has dropped, according to the legislature's Fiscal Research Division. 

The reason for the drop, said analyst Kristopher Nordstrom, is that the state now requires kindergarten students to be 5 years old on or before Aug. 31. Previously, students could turn 5 in September.

The one-year savings produced by that change will equal $50 million, Nordstrom said.

The federal stimulus package would provide $1.1 billion to the state for education. But there are strings attached, Nordstrom said. To get the federal money, the state would have to spend as much on education as it did in the fiscal 2006 year. That amount is 16 percent lower than the current education budget.

Enrollment growth at the state's universities and community colleges will cost nearly $100 million next year.

Legislators heard a briefing on the budgets for the UNC system and for the community college system on Wednesday.

Enrollment has swelled at the Community Colleges as the economic downturn has forced people to look for new careers and training, said Andrea Poole, an analyst in the legislature's Fiscal Research Division.

Enrollment, measured by calculating the equivalent of full time students, grew from by 2,348 students from fiscal year 2007 to fiscal year 2008. In the current fiscal year, enrollment grew by 6,250 to its current 201,625. There are 829,146 students taking at least some classes in the system.

That spike cost the state $23.8 million. Next year, the numbers are likely to rise even further and Poole said enrollment growth in next year's budget will cost as much as $47.7 million.

The state kicks in $1 billion of the community college system's $1.48 billion budget.

In the UNC system, enrollment is expected to grow by 12,399 students in the next two years, said Richard Bostic, a fiscal analyst. That growth will cost $44.8 million next year and $54.4 million in fiscal year 2011.

The state contributes 38.3 percent, or $2.9 billion of the system's $7.55 billion operating budget.

Education is the biggest expense in the state's budget and erasing next year's deficit will require lawmakers to seriously consider cuts to schools and universities, a fiscal analyst said Tuesday.

Legislators got a look at the reasons the state budget grows and Evan Rodewald, an analyst in the Legislature's Fiscal Research Division, included the difficult truth about education in his report.

Because education programs comprise most of the budget, some portion of future budget reductions will likely come from education.

The briefing was part of a series of updates on the state's budget picture.

How education spending adds up after the jump.

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North Carolina could fall short of projected revenue by 10 percent.

According to a presentation on the budget outlook prepared by the legislature's Fiscal Research Division, the state could fall short of its expecations by approximately $2 billion.

Through December, tax collections were down 6.6 percent.

Particularly hard hit by the recession are three taxes that make up 86 percent of general fund revenues: the personal income tax, the sales and use tax and the corporate income tax. All three are directly tied to the economy.

But state budget officers won't know exactly how bad the recession has hurt tax collections until after April 15, when corporate and personal income taxes are paid for the year.

The presentation says it is "highly probable" that the state's tax collections won't return to the projected amounts until the 2010-11 budget year.

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 revenue continues to fall.

Through November, tax collections are down 6.1 percent, according to a report released by the legislature's Fiscal Research Division. Through October, revenue was down 5 percent. Budget forecasters say it's too early to know how deep the hole will be.

The report, prepared by Barry Boardman, an economist with the Fiscal Research Division, states that through November, total general fund revenue is $520 million below a projected $7.2 billion.

Boardman's report also seeks to put the current recession in context.

In fiscal year 1982, a national recession led to a drop of 9.2 percent in the state's revenue. In fiscal year 1991, a national recession cut the state's revenue by 8.1 percent and in 2001, a recession led to an 8.8 percent drop in the state.

The state's current budget is $21.5 billion.

Boardman cites weak housing markets, tight credit and job cuts as some of the causes for the revenue loss.

When lawmakers and the governor write a state budget, they'll have to cope with a revenue shortfall and increased costs.

The report states that the state Health Plan will need $200 million to $300 million and that medicaid costs and college enrollment are expected to rise, as they often do when the economy is down.

Correction: A previous version of the post misstated the report's description of tax collections and total general fund revenue. It also mistated the projected revenue to date.

Another name has surfaced for the Cabinet.

Raleigh insiders say Gov.-elect Beverly Perdue will name Linda S. Millsaps secretary of the N.C. Department of Revenue, a key behind the scenes position that keeps tabs on state taxes.

Millsaps currently works as assistant secretary in charge of tax administration. She previously worked in the General Assembly's Fiscal Research Division, the former home of another Perdue pick, legislative liaison Andy Willis.

Earlier this month, Secretary Reginald Hinton said that he would step down on Dec. 31. 

Andy Willis may be Gov.-elect Beverly Perdue's legislative liaison.

Currently the vice president for government relations for the University of North Carolina system, Willis' name surfaced this week as a likely pick to lobby the legislature for Perdue.

Willis has a lot of experience at the legislature.

From 1996 to 2003, he was a senior budget analyst with the Fiscal Research Division of the General Assembly, serving as the primary staffer for the powerful Senate Appropriations Committee.

Perdue chaired that committee from 1995 to 2000.

For three years afterward, he worked a an assistant to the chancellor of N.C. State University. He's been at the UNC system for the past three years.

He has an undergraduate degree from N.C. State and a master's of public administration from UNC-Chapel Hill.

State revenues are down 5 percent through October.

According to a report released Friday afternoon by the legislature's Fiscal Research Division, state revenues are $320 million below the $6.3 billion target set through October. It's still too early to say what next year's budget deficit will look like, but most signs say it will be big.

"We've really got some weaknesses in our economy-based taxes and when you look forward that weakness is not going to turn around soon," said Barry Boardman, an economist with the division.

The revenue shortfall could reach $1.6 billion, said Rep. Mickey Michaux, a Durham Democrat and a key budget writer in the House. Lawmakers are going to have to make serious and deep cuts, he said. The good news, Michaux said, is that the budget can be balanced without raising taxes.

"We're going to have to do a lot of things that are going to be sort of hurtful," Michaux said.

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