"I've been very honest with everybody: who knows what we'll have to do?" Gov. Beverly Perdue takes office amid a budget crisis and one of the weakest economies since the Depression.

• Position: COVER STORY - Interview

On Jan. 10, Beverly Eaves Perdue became the 73rd governor of North Carolina--the first woman to hold the office. The New Bern Democrat spent eight years as lieutenant governor and 14 as a state legislator. Like predecessor Mike Easley in 2001, she took the reins during a recession that threatens state services and programs. She also faces a budget shortfall that her advisers say might exceed $2 billion--a gap the state constitution charges the governor with closing. Before Christmas, Perdue discussed her plans to do that and for economic development with Contributing Editor Scott Mooneyham (who assesses the political context in his column, which begins on page 16). Questions and answers were edited for brevity and clarity.

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BNC: What cuts have been considered so far?

Perdue: We went through the budget yesterday for a couple of hours. There is going to be pain across the board, but I'm going to concentrate on two core goals. One is not eating our seed corn, which is education. My goal is to not hurt the classroom, to keep the teacher and kids at the forefront of my priorities, but also to remember that the budget can't consume 100% of the time of the governor of this state.

Will you support tax increases?

I have said that I would be willing to consider a tobacco-tax increase if it were earmarked solely for health. There are no absolutes today because nobody during the campaign season had a clue what the global economy was going to look like in January 2009.

Could we see other tax hikes?

My reluctance to even consider raising taxes is very strong. I told the budget team yesterday to flag any tax ideas that were on the page--I refuse to discuss them now. I'll do whatever it requires of the state's leader to make sure that our basic services continue to run. I'll make sure that the people are safe, that the kids have school buses, that there is healthcare available and that the lights are on, if you will, in North Carolina.

During the 2001 budget crunch, Easley angered state employees by intercepting pension-fund contributions as well as city and county officials by diverting tax streams earmarked for local government. I think that the governor has done a really remarkable service to the state of North Carolina and to me and to the General Assembly by offering up the cuts he has imposed. He didn't have to do that. So he took one last hit, trying to leave the financial house in order. What he did in 2001, he did because he had to do it. I've been very honest with everybody: Who knows what we'll have do to?

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