Raleigh

The bands played. The jets roared overhead. Andy Griffith read a few words.

Beverly Perdue took office as North Carolina's 73rd governor last weekend amid all the pomp and occasionally corny ceremony that typically accompanies a governor's inauguration.

But all the flags and marching bands and pretty words didn't hide the reality that Perdue takes office amid plenty of doom and gloom.

The sluggish economy has left state tax collections well short of budgeted spending, and the resulting shortfall could exceed $1.5 billion. Perdue's first significant test will be to close that gap, either by raiding state reserves, intercepting revenue streams intended for other purpose, or slashing government programs and jobs.

Those unpopular actions will address only the budget problems in the current fiscal year. At the same time, she and her new staff will be putting together a budget plan for the next year.

Given the state of the economy and the dim prospects of a big turnaround any time soon, that budget will probably seem pretty austere.

To hear some talk, surely big tax hikes or pink slips for state employees are on the way.

There are a couple of good reasons why they aren't. In fact, Perdue, the legislature and the general public may well ride out this budget crunch with fewer effects than Mike Easley and cast did the last time the state faced recession and declining tax collections.

First, even if the general economy is suffering more than during the recession of 2001, state government is better positioned to cope with a budget squeeze.

When Mike Easley took office in 2001, only to inherit immediately a budget mess, state reserves had been depleted by a $846 million aid package for Hurricane Floyd victims.

This time around, the state has more than $800 million in its Rainy Day reserve fund. At least as important as that cash on hand, North Carolina and all states are likely to see a gully washer of Medicaid dollars flow from Washington as part of a federal stimulus package.

President-elect Barack Obama's plans for a federal stimulus package include helping states meet their Medicaid expenses.

An initial Obama plan puts North Carolina's share of additional federal Medicaid money at $1.1 billion. Health care advocates in the state say they're expecting money over two years.

About $3 billion of the state's $21 billion budget goes to meet the state's portion of the health care program for the poor.

Whatever the final amount in the stimulus plan, it won't be insignificant.

And all that gloom and doom talk, at least for a while, might recede.

Scott Mooneyham writes for Capitol Press Association. Contact him at smooneyh@ncinsider.com