03/02/11 — State and federal cuts could cost Wayne $6-7 million

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State and federal cuts could cost Wayne $6-7 million

By Steve Herring
Published in News on March 2, 2011 1:46 PM

Wayne County's budget could suffer a $6 million to $7 million hit -- equal to 12-14 cents on the county's property tax rate -- should preliminary state and federal budget cuts become reality.

Uncertainty over how the county budget will be affected prompted County Manager Lee Smith on Tuesday to recommend that county commissioners cancel a meeting today with the school board to discuss construction projects.

School board members already had told Smith they would not attend the meeting.

However, in a letter to the county the school board did not cite the economy -- its members voiced concern that a move was under way to change a plan that both boards have approved. They agreed that the two boards need to continue to work together, but that the meeting would serve no purpose.

"The board of commissioners has worked with us since 2007 to make this a reality, so this turn of events is both disappointing and confusing," schools Superintendent Dr. Steve Taylor wrote in the letter to Smith."... the Board of Education feels due diligence has been adequate and beyond the call of duty and now is the time for action and not more discussion."

Smith said that the county is hearing every day something new from the state and federal budget planners that is changing the way that the county does business, from general operations to capital projects to grants.

"If you asked me for definitive things tomorrow I couldn't give them to you," he said. "The superintendent couldn't because there are so many things up in the air from worker's compensation to school buses to the Department of Social Services and Health (Department).

"Just between schools and cuts that we can find that we are aware of today the county finance officer, Pam Holt, and I think that those hits in revenues, expenditure and reimbursements cuts total somewhere between $6 million to $7 million for Wayne County."

According to the North Carolina Association of County Commissioners, education would see additional reductions of $763 million over the governor's budget proposal, with an overall reduction in current levels at roughly 11 percent.

It could also mean that the More at Four and Smart Start programs could be consolidated or eliminated.

The proposed state budget would shift the responsibility of paying for replacement school buses to counties and force counties to assume the workers' compensation costs for state-paid public schools employees and community college employees.

It also would reduce state-funded positions in the local public school systems for administration, academic support and other non-instructional support areas.

Most of the counties' share of lottery revenues would be folded into the budget for state education expenses. Counties, by law, are supposed to receive 40 percent of lottery proceeds for school capital needs.

Wayne County is applying for $15 million in bonds through the federal Qualified School Construction Bonds program for renovation, repair and construction projects at Eastern Wayne and Norwayne middle schools.

The county will use lottery proceeds to pay the principal and local funds for the interest. However, the interest will be reimbursed by the federal government saving the county $750,000 to $800,000 per year.

The state's proposal also eliminates the county share of the corporate income tax dedicated to the Public School Building Capital Fund.

"I think some of those things will not happen, but some of them might," Smith said. "Will they be $1 million or will they be $5 million? I don't know. That being the case I am asking that we hold off on that meeting because there are just too many unanswered questions right now."

Smith said that those issues where discussed during his meeting Monday with Taylor and school staff.

"On the school bus, if you look at that that is hundreds of thousands of dollars or millions of dollars in school bus replacements," he said. "It is huge. As (schools finance officer) Ms. (Nan) Barwick said yesterday, 'I don't know how we can to do it.' She said, 'I can't do it within the existing budget.'

"We were looking at all of our sources of funds on sales tax, all of those things. This impacts the (county) capital improvement plan. It impacts everything so right now everything is on the table. We are having to figure out all of these alternatives knowing that I am going to walk into May and June blind because we are not going to know until the General Assembly gets finished."

Commissioner Andy Anderson asked how smaller counties were going to be able to survive such cuts.

Smith said that some counties are beyond crisis and that he does not know what they are going to do.

"Their only option is to raise the tax rate and there are people who can't pay that. It is a crisis," he said. "I would say there are counties dipping into their fund balance almost to the point of bankruptcy."

"My big fear, in my discussions with the Health Department and Social Services, you won't know the impact to their budgets until next March because you do not know what will or will not be reimbursed until you get later in the fiscal year," Smith said. "That is the problem. They don't really tell you that the formula changed on reimbursements. They will say there may be impact, but you don't know.

"That means we have got to hold back our costs as much as we can through the year. I have told our departments that they need to let our employees know who are funded by grants that there is the potential for them not to have a job come July 1. We may have to hold those positions or vacate those positions because if I think the money is not coming we have got to figure out how to hold back."

Small counties that depended on those state and federal grants are in trouble, Smith said. Wayne County is not among those counties because it has "tried to cut away" from the grants in order not to be "hostage" to them.

Smith said he has told his staff that there would be no new positions in the 2011-12 budget. The possible exception will be in the Day Reporting Center.

"The only way we would consider was if they could prove to us a great return on the investment," he said. "In other words by my investing a dollar I could get $10, $20, $30 or $100 back. You have got to prove that.

"We are looking to expand DRC to get our jail numbers down to reduce our costs because we can't afford it. That requires an investment, but we have to prove to the taxpayers what we are doing."

The Day Reporting Center uses electronic monitoring devices so that non-violent offenders can be placed on house arrest. That allows the offenders to work and costs the county about $10 per day as opposed to the $56 per day it costs to house a prisoner in the jail.

Smith said that after his meeting with Taylor they agreed they were not so much afraid of this year as they are of next year and the following year since the grants will be phased out over several years.