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County prepares for state shortfall

December 8, 2010

North Carolina policy makers could be forced to close a multibillion-dollar gap in the state budget, passing on their shortfalls to county governments.

The state faces a $3.5 billion shortfall for fiscal year 2011-12 because of the continually weak economy, the end of federal aid and the expiration of the temporary tax package, said Alexandra Forter Sirota, of the N.C. Tax and Budget Center.

The final state general fund budget for FY 2010-11 was about $18.9 billion.

Additional funding for the next fiscal year, however, will decrease with the expiration of the government's temporary tax package and the end of federal aid, Sirota said. When state funding decreases, the state could pass those decreases to county governments in an attempt to close the gap.

Catawba County's FY 2010-11 budget is about $202 million. This year, the county received almost $13 million in grant funds, including $3.5 million in American Recovery and Reinvestment Act funding, according to the county website.

It's difficult for the county to anticipate how to respond to the projected shortfall, said assistant county manager Lee Worsley, because it's still early in the budgeting process.

"It's really going to be very dependent on where those cuts come from," Worsley said, adding the county cut 2 percent from departments in the past to deal with revenue shortfalls. "We're going to live within our means."

The county's budget for the new fiscal year must be passed every year by June 30. The problem, Worsley said, occurs because the state budget is usually passed after the county budget. This forces the county to anticipate cuts and budget conservatively in the event of additional revenue loss after the state budget is passed.

"That's when it gets really difficult -- when there's additional mandates," Worsley said.

The state could also utilize county revenue to plug holes in the county budget, which is something Worsley said could add additional pressure on the county to continue providing services for its residents.

State-funded positions in the county could also be eliminated by the state to help balance the budget.

Sirota said North Carolina's economic recovery will likely be slow, and as a result, job creation will be, too.

The state needs to create 13,000 jobs a month to return North Carolina to pre-recession employment levels, Sirota said. This includes jobs for unemployed workers, as well as people entering the workforce for the first time.

Only 4,500 jobs a month on average were created in the last six months.

Meanwhile, unemployment in the state continues to decline, with 90 percent of N.C. counties seeing an unemployment rate decrease this year.

"Over the year, we have seen unemployment rates decline in 90 counties; however, one-third of the counties had rates greater than 10 percent in October," said N.C. Employment Security Commission chairman Lynn R.
Homes in a press release. "We continue to face economic challenges with respect to job growth, but we, at the ESC, continue to assist those looking for work and those who qualify for unemployment benefits."

The jobs shortfall for North Carolina as of September was 424,129, Sirota said.

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