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Editorial: Hold on to fund balances

When the Post reported Wednesday that the town of Cleveland has a $2.7 million fund balance ó the equivalent of 316 percent of its general fund ó commenter ěcoolbeansî issued a warning online: ěShhhhhhhhhhhhhhh, donít anyone let Bev know about this. You know how she likes money.î
Itís probably too late.
If you wonder why N.C. governors like Beverly Perdue withhold money from cities and counties when the state is in financial crisis, balances like Clevelandís should give you a hint. Many towns are sitting on a pile of taxpayersí money. The average fund balance among the stateís municipalities is said to be about 65 percent of their general fund. Whether thatís wise depends on each town and its circumstances. Cleveland, for example, relies heavily on one major taxpayer, Freightliner, and has to be prepared for the worst. So the town carries enough cushion to get it through a few bad years. Compare that to the city of Salisbury, with a more diverse tax base and a fund balance of 14 percent in 2009, or $4.7 million. If Salisbury carried a 316 percent fund balance, citizens would be up in arms and demanding tax cuts ó as well as a few peopleís heads.
Local governments will be jealously guarding their fund balances this year as Perdue pays the bills and state lawmakers deal with a projected deficit of $3.7 billion. The League of Municipalities and the N.C. Association of County Commissioners meet separately later this month to set their legislative agendas, and they most certainly will call for keeping the stateís hands off local funds.
The good news is that the new Republican majority in the state House and Senate should have a fresh approach. The House and Senate are working together on the budget, rather than developing separate budgets that inevitably set the stage for conflict. Republicans vow to keep the process open and give lawmakers at least two days to read the budget before votes. So the process sounds good.
But the bad news is the lack of painless solutions, and no improvement in the budgeting process can change that fact. As Perdue has said, the state has fallen off a cliff. Stimulus funds have run out and no one wants to renew temporary tax increases set to expire this year. That leaves the stateís public schools and Medicaid program wearing bullís eyes; they are the biggest, costliest programs and therefore the most likely targets for budget cuts.
How to make those cuts and do no harm in the process is an unanswered puzzle. But the first principle of budgeting for the governor and the General Assembly should be to balance the state budget with the stateís money.

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