Rowan officials say state moves could hurt county, school funding

Published 12:00 am Tuesday, December 1, 2009

By Jessie Burchette
County commissioners are on the record opposing two bills in the N.C. Senate that could divert for state spending needs more than $3 million earmarked for paying school bond debt in the coming year.
Commissioners took turns Monday night blasting the financial practices of the state and the attitude that Raleigh can seize funds, forcing counties to spend fund balance, increase property taxes or both.
Vice Chairman Jon Barber noted the state’s budget has increased by 50 percent in six years. Barber said if the Rowan County budget increased by 50 percent in that time period, commissioners would be run out of the county.
Chairman Carl Ford turned his fire on Gov. Beverly Perdue for taking $50 million in lottery money to ease the state problems.
“I can’t believe they have the audacity to call it the N.C. Education Lottery,” Ford said, adding, “Its been a boondoggle from the start.”
He said taking the money from schools is not fair and shows the arrogance of state government.
The bills, Senate Bill 2 and Senate Bill 386, would strip the county and school systems of money currently being used to make debt payments on the 1993 and 2002 school bond issues.
Under Senate Bill 386, sponsored by Sen. Daniel G. Clodfelter, D-Mecklenburg, the state would withhold corporate income tax revenue for two years to help balance the state budget. Revenue from the corporate income tax now goes into the Public School Building Capital Fund established in 1987 to assist counties with meeting public school building needs.
As a part of the justification for withholding the money, Clodfelter’s bill notes the average county fund balance, or savings account, is equal to 21.25 percent of the annual operating budget.
As the county deals with losses in nearly every local revenue category, the state already withheld the $81,000 February payment of school building funds.
Through an agreement between the Rowan-Salisbury Board of Education and the county commissioners in 1993, those funds help pay the 1993 bond debt. The payment currently runs nearly $2.4 million a year.
Currently, the county expects to receive $1.1 million per year in corporate income tax revenue in 2010 and 2011. If Senate Bill 386 is enacted, the county will lose the $2.2 million and have to come up with other money to pay the bond debt.
Senate Bill 2, sponsored by Sen. John Snow, DńCherokee, would change the formula for distribution of lottery funds. Under the current formula, 65 percent of the proceeds are distributed based on the number of students in each school system. The remaining 35 percent is distributed to counties that have a higher-than-average tax rate.
Rowan County gets an extra $1.1 million a year based on its tax rate.
Senate Bill 2 would take away the extra funds. All lottery proceeds would be distributed based on student numbers.
Currently the county receives $2.4 million a year in lottery money and uses it to pay off the 2002 school bonds.
County officials are also nervous about the possibility the state may withhold more lottery money to help plug the current $2 billion state shortfall or an expected $4 billion gap for the coming fiscal year.
County Manager Gary Page warned that the county’s $20 million fund balance will likely take a substantial hit over the next two years, forcing commissioners to raise taxes in 2012.
During the discussion Monday night, Commissioner Chad Mitchell urged the public to call, write and e-mail Perdue and legislators to register their opposition to the proposed legislation.
Despite the county having to dip into savings to balance the current budget, Mitchell found a bright side.
“We’re in a heck of a lot better situation than a lot of counties.”
Commissioner Tina Hall went through a list of newspaper articles citing the impact on school systems if the state takes lottery and Public School Capital funds.
And she expressed concern that counties “haven’t seen the last of the state surprises.”
Contact Jessie Burchette at 704-797-4254.