10/13/09 — County realizes Medicaid savings

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County realizes Medicaid savings

By Steve Herring
Published in News on October 13, 2009 1:46 PM

Wayne County could realize a savings of $700,000 as a result of the Medicaid/Article 44 sales tax swap that was finalized Oct. 1.

The savings could have been as high as $2 million had the economy not tanked, County Manager Lee Smith said.

Smith is looking for the $700,000 to help the county cover other losses it might incur because of state and federal budget cuts and reduced revenues.

Also, the sour economy is projected to cost the county $2 million or more in lost sales tax revenues.

The swap was approved during the 2006 General Assembly session. The phase-in of the change began to affect counties on Oct. 1, 2007, when the county Medicaid share was reduced by 25 percent, from 15 percent of the non-federal share to 11.25 percent.

However, to offset these additional costs to the state, counties saw their Public School Building Capital Funds (ADM) reduced for the 2007-2008 fiscal year only. That amounted to $140,000 in Wayne County -- money that the county had to come up with.

The legislation also included a hold-harmless provision that guarantees each county will benefit by at least $500,000 as a result of Medicaid relief each year.

Sales tax reports run 60 days in arrears so it will be the first of the year before the impact of an October without the one-half centsales tax will be clear.

"Looking today at the Medicaid swap, the sales tax drop and change, I am probably in a positive position by about $700,000," Smith said. "That is also taking into account the degrading of other sales taxes and looking at the economy. Looking at Article 44 degrading because of the economy over the past year, I think (savings) could have been more."

The story is similar in other counties, he said. Smith said what he is hearing most about are the poorer counties that did not have the sales tax to begin with.

"They got a boost," he said.

Smith said that luckily for Wayne County, it budgets "very conservatively" on revenue estimates on sales tax.

"I think it is important to say that we do not use state estimates," he said. "We use them in our thoughts, but we look at our actual sales for Wayne County because you cannot compare Wake County to Pamlico, to Stanly County, to Wayne County. You can do generalized averages, but every economy is different.

"You have some counties where unemployment rates are high. That means there is going to be a direct effect on sales tax because people don't have the money to spend and receipts are going to be down. Then you have to take into consideration if the county has retailers. It may be a bedroom community where everybody buys next door."

Wayne County is fortunate to have the Sam's and the Wal-Marts, the chain stores as well as the "local mom and pop" stores, he said.

"You can basically do everything here," Smith said.

That has helped to keep Wayne County from suffering as badly as others have from the economic downturn, he said.

"First, people shop here," he said. "We are far enough away from Raleigh and larger metropolitan areas where people, because of distance, shop at home. I think another issue, a big issue for us, is the (Seymour Johnson Air Force) Base."

Military personnel continue to buy real estate here and that has helped the county keep a level of value on homes, he said. Sales have slowed, but have continued, Smith said.

"The Medicaid swap is a positive for us because Medicaid continues to climb, but for the state, they have taken on a big headache that we had suffered for many years as counties," he said. "I appreciate what they did. If not for the economy falling we would have been in a much better position. That $700,000, I did not count on it. So that should help us with some of the other losses that we may incur this year."

Also, Smith said that 'to pay it safe" he had not budgeted for any increase in sales tax revenues. The best case is looking for the revenues to remain flat, he said.

The budget included no new jobs or salary increases and reduced major capital items.

"You can only do that so long," he said. "If you live in a house, windows, shingles repairs are going to have to happen. We are doing minimal things, but that means in the next year or two, I'm going to have to pick back up. That means I have a hole in the budget.

"The gap-stop was that I was being very conservative in our revenue estimates and that that growth (from the swap) would fill that gap."

He said commissioners have said they do not want a tax increase. Thus far, the county has met that commitment and the intent is to continue to do so, he said.