Brian Hiatt, City Manager - City staff is working hard to finalize recommendations on the FY 2009-2010 budget. In North Carolina, the City Manager has to present a balanced budget recommendation to the City Council by the end of May and the Council has to adopt the budget by the end of June in preparation for the next fiscal year beginning July 1. I anticipate the presentation will take place on Tuesday, May 26.

Obviously budgets are a challenge to everyone in this economy regardless if it relates to a business, household or non-profit. In the fiscal year we are in now, the City Council has approved delays and cuts in expenditures of over $9,000,000 to cover the impact of the economy on this year’s budget. The FY 2009-10 budget recommendations will incorporate additional expenditure cuts.

One challenge is trying to anticipate what impact the State’s budget situation will have on local governments. Recently NC House of Representatives Speaker Joe Hackney told municipal officials that the latest forecasts for 2008-09 are for $17.68 billion in revenues. Unfortunately, the State originally budgeted for more than $21 billion in expenditures.   Dramatic cuts have already been made but these new numbers mean the Governor will have to cut another $950 million out of the current year budget.

He also said that revenue projections call for $17.5 billion in revenues for the upcoming 2009-10 budget with most of the decrease are due to declines in income tax collections. The 2009-2011 budget previously passed by the NC Senate was based on January revenue projections, which were $1.3 billion higher than these current projections. As a result the House is faced with making up this additional gap. Certainly we empathize with our State representatives as they face long hours and tough decisions.

Our greatest fear is that the State will react to revenue shortages by taking money that is due to local governments and/or by passing on the responsibility for services currently provided by the State to local governments. This has happened during past economic downturns, leaving local governments scrambling to totally rework their budgets as they were out-of-balance overnight. 

For example, some legislators have already suggested one way to help solve the transportation funding issue is to reverse the State’s historical role and to turn more of the responsibility over to municipalities and counties. In North Carolina counties have not been responsible for road maintenance since the Great Depression. The North Carolina Department of Transportation has also been responsible for maintenance of major roads running through municipalities and connecting communities. Cities like Concord have been responsible for maintenance of only local public streets, though in recent years Concord has averaged spending over $2,000,000 helping to improve or maintain NCDOT streets in our city to meet critical needs.  

If this switch were to be made, the big issue is where this money will come from. If the State does not provide funding, or new funding options, then the burden will fall on the only revenue that local governments can control – the property tax. The NC Legislature controls how local governments raise revenues and some legislators continue to point out that most local government property tax rates are well below the State maximum limit. However, many local governments, like Concord, are already maintaining and improving roads using local property taxes. When you get to major roads connecting communities the relationship between local property taxes and the use of these facilities is much weaker. 

The same issue applies to the State shifting other service responsibilities to local government and/or keeping revenue traditionally due to municipalities. It puts more pressure on property taxes.  Certainly, the City of Concord will continue to monitor the efforts in Raleigh to address State budget issues. Simply shifting the responsibility from one level of government to another without making comprehensive changes to the way services are paid for is not the solution.