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RALEIGH (AP) — Gov. Beverly Perdue said Friday she plans to develop a budget proposal for the next two years that doesn't extend a temporary 1-cent sales tax increase approved a year ago to help close a deep fiscal hole.

But her aim to let the extra penny expire could come at a steep price to state government programs and services — her administration directed agencies this week to offer ways to cut spending by up to 15 percent in the fiscal year starting next July 1.

With the sales tax and other temporary taxes about to end, the loss of federal stimulus funds and the continuing weak state economy, the Legislature might be forced to close a budget gap of at least $3.3 billion, according to the Office of State Management and Budget.

"We know that we have a tremendous budget dilemma, and we've known that for two years," Perdue told reporters after a Hurricane Earl briefing. "Nobody likes to shed jobs, nobody likes to shed services, but in times of economic conflict you've got to do that and North Carolina will continue to do that until the economy fully recovers."

The 1-cent sales tax increase raised the base rate in all 100 counties on most nonfood purchases from 6.75 percent to 7.75 percent starting a year ago this week, and is expected to generate more than $1 billion alone this year. It was part of a tax package approved by Democrats in August 2009 to close what they calculated as a $4.6 billion gap between revenues and expenditures after tax collections fell nearly 11 percent — the worst decrease in at least 40 years. Federal funds and spending cuts helped eliminate the rest of the gap.

This year's $19 billion budget approved in June narrowed an estimated $800 million budget gap.

In a memo dated Thursday to departments and agencies, State Budget Director Charlie Perusse asked for options on how they would cut 5 percent, 10 percent and 15 percent from their offices.

"Across-the-board reductions have already been taken," Perusse wrote. "This budget cycle we need to focus on supporting mission critical services and eliminating programs that have outlived their usefulness."

The memo's contents were first reported by The News & Observer of Raleigh.

Perdue said she'll present a two-year budget to the General Assembly early next year that lets the sales tax revert to 6.75 percent, but she left herself room to change her mind.

"I believe we should try to cut to the core ... and then we'll make those decisions later," Perdue said. At this point in time, my budget will not have that sales tax increase."

Advocates for social programs argue additional tax revenues — such as through broadening the base of services subject to the sales tax and closing corporate loopholes — shouldn't be taken off the table.

"We have to look at revenues and targeted budget cuts," said Rob Thompson, coordinator Together NC, a coalition of more than 100 groups opposed to closing budget gaps with spending reductions alone. "To say we're going to cut 10 or 15 percent more to Health and Human Services, for example, could really be devastating."

Republicans argue the higher temporary taxes weren't needed to begin with because Democratic budget-writers actually spent more than before the Great Recession and relied too heavily federal stimulus money. The temporary taxes will be a fall campaign issue as Republicans seek to regain control of both chambers of the Legislature for the first time in 112 years.

"Spending has gone up some each year, when everybody else is tightening their belt," House Minority Leader Paul Stam, R-Wake, said this week at a GOP rally. "The people just cannot stand that."

Democratic leaders in the Legislature said Perdue is making the right budget moves but decisions on taxes won't be made until next spring and depend on whether tax collections are improving enough.

"We just have to wait and see what our revenue picture looks like," said Rep. Mickey Michaux, D-Durham, senior co-chairman of the House Appropriations Committee. "I don't care who's in office running what. That's a big hole to fill."