RALEIGH – Gov. Bev Perdue outlined her 2009-2011 budget proposal Tuesday, a plan that includes spending cuts, tax increases and employee layoffs.

The proposal includes $21 billion of spending for next year, which is a $360 million reduction. The dip in spending comes from a need to compensate for $6.4 billion less in revenue over the next two years.

Some of that spending reduction would come from the elimination of 967 jobs and 440 vacant positions. Of the 967 already filled, 619 of them, mostly in the area of the Department of Corrections, will be reassigned to other positions. That leaves 268 people potentially out of work.

"In the main service areas, where needed, we hope to find those employees other jobs in state government," N.C. Budget Director Charlie Perusse said. "But there is not a guarantee that there will be a position in state government."

Although many state agencies were preparing for the worst with Perdue's budget, many state employees said they were pleasantly surprised by the governor's plan (Watch how Perdue's proposed budget would impact state employees).

Perdue's budget proposal would also make up for some of the lost revenue in higher sin taxes – a 5 percent increase for alcohol and $1 increase per pack on cigarettes. She said the increased taxes wouldn't hurt the state's tobacco industry.

"There is still a tremendous global market for the product. North Carolina has one of the best lines of tobacco available anywhere in the world," Perdue said. "I do not believe this will cause a diminishing of the enterprise in North Carolina."

What a sin tax hike would do, Perdue said, is raise more than $500 million for the state. Some taxpayers say a tax increase like this makes sense (Watch the reaction to an increased sin tax).

"Paying a little extra money in some kind of tax for something that you don't need – because nobody actually needs alcohol or cigarettes – is a small price to pay," Charlotte resident Lucas Ross said.

One area not feeling the sting quite as bad is education. Perdue is giving teachers a pay raise, proposing more per-pupil spending. She said by doing this, she is staying true to her commitment to keep education strong.

Perdue's plan is just a proposal. The General Assembly will now begin work on its own budget document, which could include some of her spending proposals.