Gone for good

Counties achieve three priority goals as state institutes Medicaid phaseout, provides alternative revenue options for schools and infrastructure needs

By Todd McGee
Communications Director

Years of grassroots lobbying by county commissioners across North Carolina paid off in late July as the General Assembly adopted a state budget that provided counties with Medicaid relief and additional revenue options, satisfying all three county priority goals in one fell swoop.

In the whirlwind days leading to adjournment, President Terry Garrison (shaking hands with Speaker of the House Joe Hackney) and President Elect David Young (speaking with Rep. Bill Owens, a former NCACC president and longtime county friend) were among a host of county officials from across the state to visit Raleigh on Aug. 1 to offer thanks to legislators for including county needs in the budget. (Photo by Jason King)

“The Medicaid relief and the revenue authority contained in the state budget represent a win-win for all counties in North Carolina,” said NCACC Executive Director David F. Thompson. “Counties are relieved of an expense that is growing more than 10 percent a year and over which they have no control, and the additional revenues will help counties better provide for the schools and other infrastructure needs caused by our state’s rapid growth.”

The three-year phaseout will result in counties being completely relieved of their Medicaid burden beginning July 1, 2009. The state will gradually assume the Article 44 sales tax to help pay for the additional costs being incurred, and the state will switch the Article 42 half-cent sales tax from per capita to point of collection in an effort to make the swap more equitable for urban counties.

The plan also includes a hold harmless of $500,000 – meaning that every county will be at least $500,000 better off than if it were still paying for Medicaid. If the relief a county realizes is not at least $500,000 more than the revenues it relinquishes, the state will make up the difference.

The hold harmless provision does not have a sunset.

“We would not have gotten such a favorable deal were it not for the efforts of county commissioners around the state the last few years to educate the legislators about this issue and the impact it was having on their counties,” said Thompson. “In particular, our executive officers – President Terry Garrison, President Elect David Young, First Vice President Bill Kopp, Second Vice President Mary Accor and Past President Kitty Barnes – were in Raleigh or on the phone constantly with House and Senate leadership and the Governor’s Office. Their diligence and dedication played a major part in convincing the General Assembly that this was the year to solve this problem.”

A historic session for North Carolina counties saw Medicaid relief and revenue options included in the 2007-09 state budget, signed by Gov. Mike Easley into law July 31. Gov. Easley was one of the Association’s major allies for Medicaid relief and revenue options and pledged his trust in county commissioners to “do the right things on the local level” in the waning days of budget negotiations. (Photo by Todd McGee)

Counties will also receive the option of enacting – if approved in a voter referendum – either a 0.4 percent land transfer tax or a quarter-cent point-of-collection sales tax. The revenues are not earmarked.

“The low-wealth counties can now get out of poverty in North Carolina,” Gov. Mike Easley said July 31 during the budget signing ceremony. “They can invest in themselves – in their infrastructure, in their schools. They can do for themselves what they have not been able to do in the past, and they will have additional revenue options so that property taxes will not continue to rise on our citizens across the state.

“Right now we are seeing Medicaid eat up so much of the low-wealth counties’ budgets. We have taken that and we are going to pay that bill, as we should have all along. At the same time, we are going to let the counties continue to have revenue options they have not had before to stop this continuing rise in property taxes. I think the people of North Carolina will benefit from that and appreciate that.”

The plan provides for immediate Medicaid relief beginning this October. The county share of the state portion of Medicaid will be reduced from 15 percent to 11.25 percent effective Oct. 1, 2007. The state will take approximately half of the corporate income tax dedicated to the public school capital fund for 2007-08 to help fund the relief for 2007-08; even so, every county still comes out ahead in this budget year.

Vance County Commissioner Danny Wright thanks Rep. Michael Wray (Northampton County) for his support of Medicaid relief and county revenue options. (Photo by Jason King)

The county share will be reduced to 7.5 percent on July 1, 2008, and to 0 percent on July 1, 2009. The state will assume the per capita half of the Article 44 sales tax on Oct. 1, 2008, and will assume the other half on Oct. 1, 2009. The distribution method of the Article 42 will be changed from per capita to point of collection effective July 1, 2009.

The Medicaid deal and additional revenue options proved difficult to resolve for legislators, who adopted a temporary state budget in late June and then spent almost the entire month of July trying to hammer out a deal that would pass both chambers.

“If there is any one thing that stands out about this budget, it is the Medicaid,” said Rep. Doug Yongue of Scotland County during the floor debate. “It will make a tremendous difference. We’ve been giving lip service to Medicaid since I’ve been here but that is reality now.”

The House’s original budget included $100 million of one-time relief, while the Senate pushed for a permanent solution. The House agreed to the need for a permanent fix but also insisted that additional local revenue authority be given to counties and wanted to make the temporary quarter-cent sales tax permanent to help the state pay for the increased costs in the future.

President Terry Garrison and President Elect David Young speak with Rep. William Brisson, a former Bladen County commissioner, while visiting the Legislature on Aug. 1. (Photo by Jason King)

The Senate eventually agreed to include the local-option land transfer tax, leading to the major victory for counties.

“In October 2005, our Board of Directors adopted a strategic goal to redefine the state-county relationship, and this historic deal is tangible proof that the relationship is strengthening,” said Thompson. “I am truly amazed at how responsive the legislators were to our concerns, and at how much effort they put into devising this solution. I am also greatly appreciative of the assistance we received from Gov. Easley and his staff.”

Gov. Easley emerged as a major advocate for county legislative goals as budget negotiations reached a critical stage.

“I trust the county commissioners to do the right things on the local level,” Easley said a few days before the budget agreement was reached. “After all, the county commissioners are much more closely in touch with the people of their counties than I am or the legislators are. But they need some additional revenues in this new economy with the higher cost of the additional demands, especially in low-wealth counties, in order to get some relief on property taxes.”

With the budget out of the way, the General Assembly moved quickly to adjourn Aug. 2, taking up several other issues of importance to counties. The Legislature will reconvene for the 2008 short session on May 13.