Mount Olive sets new guidelines for budget
By Catharin Shepard
Published in News on November 14, 2010 1:50 AM
MOUNT OLIVE -- After weathering a tough financial year, the town of Mount Olive will take an unusual step in preparing for its 2011-12 budget: Creating a draft budget that does not include any revenue from state-collected taxes.
The small town has suffered several cuts in its state tax revenue returns in the last few years, losing hundreds of thousands of dollars in beer and wine tax, sales tax and motor vehicle tax money, while also upping the amount it contributes to the town's employee retirement fund, as required by state guidelines.
After hearing from Local Government Commission representative Sharon Edmundson at the town board meeting earlier this month, town officials have decided the best way to budget for next year is to prepare for the worst, Mount Olive Mayor Ray McDonald Sr. said.
"We can't anticipate what we get from the state," McDonald said. "How do we budget not knowing what the state's going to do? Well, I know for sure next year the deficit is going to be larger than it is right now."
Without knowing how much tax money the state will return to the town, the town will prepare at least one version of a "zero-based" budget, a budget that does not include any of the revenue.
"That way we don't get caught with our britches down later on, spending money we don't have," McDonald said.
That is a change from the way the town has done business in the past, when officials sometimes chose to front the money for utilities and other improvement projects, paid for by state grant money that had not yet arrived.
That is one of the reasons the town struggled to pay the bills this year, officials reported. Mount Olive used town money to pay for a sewer improvement project that was supposed to be covered by state grant funding, but months after spending the money, still has not received the promised grant.
"The top priority is to get this money back that we fronted on the sewer project. If we get that back, that's going to go a long way to helping us," McDonald said.
Anticipating receiving money from the state is not something that the town can count on any longer for its budget, he said.
The financial troubles have also affected town employees. The town laid off several full and part-time workers. Paying employee salaries is one of Mount Olive's largest expenses, the mayor said. About a tenth of the money from the state goes to salaries.
"If we don't get it, we get in trouble real quick," McDonald said.
The town is currently looking at several options about its hiring strategy, but the mayor is hopeful things will be back on track by March. However, he is presently unsure how the recent changes in leadership in the state General Assembly will affect the town.
Ms. Edmundson strongly encouraged the town to focus on rebuilding its depleted general fund balance. The mayor felt using the general fund money as it has been used was justified, and the best use of the fund under the circumstances.
"We (had) $190,000 worth of bills that hadn't been paid, so my contingent is if you've got the money take the money in the fund balance and pay the bills," he said.
The town owes it to the taxpayers to use the money it already possesses, even if it is fund balance money, to get those bills paid off. The fund balance is intended to be an emergency savings account for the town, and that was the case here, McDonald said.
"All that fund balance is something for a rainy day, but if $190,000 in bills isn't rainy day time, I don't know what is," he said.
However, the town is not going to leave the balance as low as it has fallen, although officials are still working on ways to fix the problem.
"We're going to build that back up," McDonald added.
The town finances are not where they need to be, but the learning experience has helped officials know how to respond to financial difficulties, McDonald said.
"I think we're going to survive this crisis, and when we come out the other side of it, we'll be better for it."