State Treasurer Folwell says local governments should spend with ‘eyes more wide open’
Published 12:00 am Tuesday, May 12, 2020
By Liz Moomey
SALISBURY — State Treasurer Dale Folwell says transparency, data, communication and sound policies at the state and municipal level will allow North Carolina to pull out of the current economic crisis “quickly and strongly.”
In an interview with the Post, Folwell pointed to $4 billion of the CARES Act that has gone to assist municipalities, a well-positioned state pension plan during economic crisis and many municipalities across North Carolina with strong fund balances as positives. During market volatility, he said the state pension plan was only down 3% when the stock market closed on Friday.
As municipalities begin preparing their budgets predicting a significant loss of revenue, the treasurer advised to think about planning like a stop light. Red is something municipalities will have to stop because it’s more of a want than a need. Yellow involves changes to bridge a budget shortfall. Green items do not need to be changed. Folwell recommends municipalities look outside to other counties or cities to learn best practices and ideas.
Municipalities should be looking at their spending with their “eyes more wide open.”
“Every time you spend a penny or buy a paper clip, you better ask if it’s necessary,” Folwell said.
From Murphy to Manteo, municipalities rely on revenues that are based on consumption, he said.
“When people are not mobile and not working, they’re not consuming,” Folwell said. “This is across the spectrum not just for cities and counties but also the state itself, whether it’s gas taxes, sales taxes, tourism dollars, haircuts or hamburgers and everything in between.”
As revenues fall, some municipal managers have said “no” to a tax increase. Salisbury included. Folwell understands that, saying the question after raising taxes is whether it will drive up delinquency on property taxes, water and sewer and electricity.
Folwell said citizens can help their municipalities by staying local to buy a haircut or hamburger, and especially avoid crossing state lines. He also offered for citizens in a good economic situation to get a vehicle registered or inspected, even though deadlines are currently deferred.
“That’s the single biggest thing that people could do to help,” Folwell said. “The sooner they do that, the sooner it helps the city and county the more that can help their city and county. The quicker they can help their city and county, the less austere the city and county needs to be.”
Folwell said he is concerned about cities and counties that “barely worked themselves out of the last recession.” He said the COVID-19 economic toll is similar to 2008 recession and the economic aftermath of Sept. 11.
Even when the stock market and employment were at all-time highs and interests rates were at historic lows, the state treasure’s Local Government Commission had about 200 of 1,300 entities on its watch list. The commission, which oversees debt of local governments in the state, requires municipalities to have a fund balance of at least 8% and to be economically diversified.
A return back to normal will solve the problems of municipalities, he said.
“Motion creates emotion,” Folwell said. “The motion of people to go back and consume — get a haircut or a hamburger. The motion of people going back to work. That’s going to fix a lot of issues that the cities and counties are facing, but it’s going to take a while.”
Folwell said he expects some municipalities to dip below the 8% requirement because of slower tax revenues.
For municipalities that dip into their reserves or borrow money, they will need a plan to replenish it or pay it back, he said.
Folwell commended municipalities, like Salisbury and Rowan County that have strong fund balances, for their conservative management.