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RALEIGH - Governor-elect Bev Perdue says O. Max Gardner, a governor and Democratic power broker in the first half of the 20th century, is one of her favorite political figures in Tar Heel history. Gardner was in office at the beginning of the Great Depression, and Perdue said he set an example relevant to the current economic crisis.

"He used the time as a transformational period for the state of North Carolina," Perdue said. Instead of simply cutting the state's budget, Gardner invested in roads and universities so the state would be positioned to prosper when the economy turned around.

And even as North Carolina faces a budget shortfall that could be as large as $1.6 billion this year, according to state economists, Perdue says the state needs to invest in education, transportation and other pillars of economic development.

"The day I take office, I'm going to be prepared to deal with a global economic crisis," Perdue said.

Gov. Mike Easley, whose term ends in January, has ordered state agencies to cut as much as 5 percent from their budgets. The goal, according to officials who briefed legislative leaders last week, is to have $1.2 billion extra on hand to plug shortfalls in the $21 billion budget the General Assembly passed last year. That doesn't account for extra cuts that would be needed if problems worsen, or another $300 million shortfall faced by the state-funded employee health plan.

Perdue won re-election Tuesday, and on Jan. 10, she will replace Easley, who was term-limited by the state constitution. Both are Democrats. Perdue praised Easley's cost-cutting efforts, saying they will make managing the state much easier when she takes office.

In an interview Friday, Perdue said she planned to name a chief of staff early next week. And she plans to announce the members of her "BRAC budget reform" panel soon.

That group will look for cuts throughout state government and offer them to the General Assembly as a package. The idea was one of Perdue's key campaign pledges.

"It's always welcome to have another set of eyes on what we're doing," said Rep. Hugh Holliman, a Lexington Democrat and House majority leader. He said it may be tough for Perdue to set up a budget-cutting process and propose a set of trims in time for the General Assembly to pass a budget by the end of June.

"And it is our (the General Assembly's) responsibility to pass a budget," Holliman added.

In North Carolina, the governor proposes the first version of the budget unveiled every year. In 2009, the Senate will next create a version and then the House. Negotiators from both chambers and the governor's office then hammer out a final deal.

The House and Senate will be controlled by Democrats, Perdue's own party. However, institutional rivalries come up, and Perdue said she has no illusions that her term will be conflict-free.

Easley was successful in pushing through many of his pet priorities, including his More at Four preschool program. But much of his success came during an improving economy.

Yet not all his ideas were fondly received. Increases he proposed to cigarette and beer taxes last year were roundly criticized and then ignored by legislators.

"I understand we're going to have many rocky moments," Perdue said. She said there would be times she would have to "stand up" to legislators, but she said she hoped to minimize any disharmony.

Perdue does have one advantage Easley did not. The outgoing governor was never a legislator and had to learn the somewhat Byzantine ropes of constructing the state budget. Perdue at one time led the Senate committee responsible for crafting the budget and has presided over the state Senate for the past eight years as lieutenant governor.

If she does pursue an aggressive cost-cutting agenda, she may win favor with Republicans, who have been urging more austerity in state government for years.

Senate minority leader Phil Berger, a Rockingham County Republican, said the fact Easley has been forced to order cuts shows the state's budget wasn't balanced when it was passed over the summer.

A balanced budget, he said, "isn't all that complicated. Is it easy? No. But it isn't complicated."

Berger said the state needed to reduce spending overall. Like Perdue, he pointed to areas where more investment was needed, even in hard times.

Roads, other transportation projects and water lines are areas where he would like to see spending expand.

He said the state needed to continue spending on education, but contended that increasing overall education spending won't necessarily lead to higher test scores. Instead, Berger said, money should be shifted from programs that don't work to things such as raising teacher salaries.

"There's a lot of money that goes into education that does not provide us with the improvement we need," Berger said. "My personal view is the governor's More at Four program is not doing anything to improve our test scores or improve our graduation rate."

Perdue made investment in education a pillar of her campaign platform and has said that education is one part of the state budget she would like to protect from cuts. That may be difficult given that more than half of the state's money goes toward public schools, community colleges and the university systems.

Even Easley's current cost-cutting plan reclaims $117 million from public schools.

Perdue and the new General Assembly have about two months before they officially begin work. About that time, state economists say, tax collection numbers will tell officials whether budget problems are more or less than the $1.2 billion estimate.

Contact Mark Binker at (919) 832-5549 or mark.binker@news-record.com