Counties feel pinch during budget planning

By Todd McGee
Director of Communications

It may not sound as romantic as those other rites of spring – like flowers blooming and trees producing green foliage – but preparing a budget is something county officials have to deal with every year at this time. For most county managers, however, preparing a budget is not exactly akin to a stroll through the park.

County commissioners around North Carolina are starting to get their first looks at 2005-06 budget proposals, and in many instances, the news is not pretty. Out-of-control Medicaid costs, recent mandates for smaller class sizes and other demands, coupled with a population that is one of the fastest growing in the nation, are weighing heavily on county budgets.

Some counties are facing steep increases in the property tax rate, while others will be struggling to hold the line. Camden County, which was the eighth-fastest growing county in the nation last year, is starting to feel the effects of that rapid growth. County Manager Randell Woodruff’s proposed budget included a 13-cent increase in the property tax rate to help pay for increased infrastructure needs, like a new elementary school and new sewer lines.

Watauga County Manager Rocky Nelson’s proposed budget included a property tax increase of 5 cents, which would be used mostly to fund high school improvements and develop a fund for long-term capital school needs, according to the Watauga Democrat.

Mecklenburg County Manager Harry Jones told his board in early May that a property tax increase is likely to be needed to continue providing the current level of services. “We cannot fund current services at the current tax rate,” Jones said, according to The Charlotte Observer.

Granville County is also experiencing some growing pains, and the budget prepared by County Manager Dudley Watts and his staff proposed a 2-cent increase in the tax rate, which would be used to retire school building bonds. The county also is looking at building a new high school, and the school board is requesting a $1 million increase for local expenses, half of which would go toward an increase in the teacher pay supplement.

The county is also considering expanding its main library in Oxford and is looking at upgrading its elections and emergency communications equipment.

Because of the demands from the school system, the county is exploring instituting an impact fee on new land development, Watts said.

Granville is just one of many counties looking for new funding sources. Lee, Pitt, Sampson and Alexander counties were attempting to get local-option sales taxes of either one-half cent or 1 cent, with most of the funds being earmarked for capital needs, primarily schools. Other counties are following those developments closely to see if they might consider pursuing a local-option sales tax in future years.

School bond issues are prevalent around the state. A survey by the U.S. Bureau of the Census showed that North Carolina was one of only six states to see an increase in the number of elementary school-aged children in 2004. Considering recent mandates by the General Assembly for smaller class sizes in the lower grades, many North Carolina counties are facing a potential school construction crisis.

Haywood County voters overwhelmingly approved a $25 million school bond issue May 3. The county needs a new elementary school and will add additional classrooms at three other elementary schools. Some of the monies will also go to provide athletics facilities and install air conditioning in two middle schools.

Pender County voters approved two school bond issues worth $56 million on May 3. The largest issue, $51,475,000, will go to school construction needs.

In Martin County, the board of commissioners is taking steps so that voters can decide July 12 whether or not to approve a $17.1 million school bond referendum. On May 10, Johnston County voters decided on an $85 million referendum, which represented the largest school bond issue for the county in more than a decade. In addition, voters considered a separate $10 million referendum for needed facilities at Johnston Community College.

In Union County, the school system is requesting more than $500 million for capital needs over the next five years. Chatham County has identified more than $150 million of capital needs, most of it for schools.

While schools are a big budget driver for counties, Medicaid remains an albatross around the necks of counties. With the New York Legislature recently taking action to cap its counties’ share of Medicaid services costs, North Carolina is now the only state that requires counties to pay a fixed percentage of the state’s Medicaid share.

Counties are expected to pay more than $450 million for Medicaid in 2004-05, and that number is expected to grow to at least $480 million for 2005-06. Medicaid costs are increasing about 10 percent annually, while the local tax base is going up by about 7 percent each year. This discrepancy means that counties either must raise local property taxes or cut local services to fund a federal/state program.

“Medicaid costs have soared in recent years – about 67 percent since 2000” across the state, said Alexander County Manager Rick French. “During the last two years in Alexander County, Medicaid costs have increased over 20 percent while our tax growth has increased less than 3 percent. We don’t have any control over the biggest county budget driver, and it’s probably the fastest growing line item in our budget.

“Medicaid costs take away other county needs, from schools and education, law enforcement needs … emergency services. It takes funds away from those projects. The Medicaid costs just cripple the counties in North Carolina.”