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Editorial: Dubious diversions

Gov. Bev Perdue can be commended for her commitment to make state education spending a priority even in the midst of this downturn, but many local government and school officials have reason to be worried that her promise will be fulfilled at their expense.
That’s already happening, to some extent. Rowan and many other counties are now scrambling to fill larger funding gaps than anticipated in the wake of the state’s decision to withhold $88 million of corporate income tax and lottery proceeds supposedly dedicated for school construction. While defended as necessary to help balance the state budget for 2008-09, that diversion has already cost Rowan County $580,000 in lottery proceeds ó money local officials were counting on to help retire school bond debt. Coupled with a larger than expected drop in sales tax revenue late last year, the county is now looking at a projected $4.7 million budget shortfall for this fiscal year.
Now, to the dismay of local officials here and across the state, there’s talk of extending such revenue shifts further into the future. Sen. Daniel Clodfelter (D-Mecklenburg) is the primary sponsor of Senate Bill 386, which would redirect the corporate income tax revenue devoted to school capital needs to the state budget for the next two fiscal years.
Another proposal, Senate Bill 2, would change the formula by which lottery proceeds are distributed. Rather than making allocations based on school rolls and the county’s tax rate, the system now used, SB 2 would distribute lottery proceeds solely on the basis of average daily membership. While the state’s largest school systems might welcome that change, it would take another bite out of Rowan’s share of the lottery pie and inject even more uncertainty in the budgeting process.
If both of those bills passed, they would cost the county about $3 million per year, forcing it to dig deeply into the fund balance ó or raise property taxes. Neither of those is a pleasant scenario.
What’s particularly rankling to local officials is the rationale offered as partial justification for the diversions, and possibly continuing such shifts into the future. Because counties such as Rowan have maintained healthy fund balances, the state apparently believes it’s entitled to force counties to dip into those balances to help weather the current crisis. So after counties dutifully save for a rainy day, the state then steps in and grabs the umbrella. That’s hardly incentive for counties to prepare for just such fiscal emergencies.
It was bad enough that lottery funds promised for education were channeled elsewhere ó an occurrence many lottery opponents had predicted would occur. However necessary Perdue and other state leaders might deem that diversion, it came at the expense of local governments now contemplating employee furloughs, service cutbacks, school budget reductions and other belt-tightening. While the state didn’t create this crisis, further fund diversions would compound the pain at the local level and make difficult budget decisions even murkier.

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