Easley announced Tuesday that North Carolina is facing a $900 million budget deficit for the fiscal year and declared a state of fiscal emergency.
To compensate for some of the budget shortfall, Easley announced that the state will keep about $200 million in local tax revenues that normally are shared with municipal governments.
Tuesday was the second time in Easley's year-old administration that the governor has called for municipal budget cuts, leaving local governments hard-pressed to make additional cuts from already streamlined budgets.
Wealthier counties in the state stand to lose a substantial amount of revenue. Officials from the N.C. League of Municipalities said Durham County will lose between $4 million and $5 million.
The city of Chapel Hill faces potential losses of $1 million in tax revenue.
Reactions of local government officials are mixed. Chapel Hill Town Council member Jim Ward said trimming the town's budget will not be an easy task. "We face very difficult decisions," he said.
Ward said he is not sure at this point which community programs will be affected by budget shortfalls. "Everything is on the table at this point," Ward said.
Durham City Council member Howard Clement said said he is not certain what the impact of the funding cut will be but that he is optimistic about the city's ability to recover from the losses. "We'll bounce back," he said.
Clement added that Durham recovered from a similar situation during the 1991 budget crisis.
