State's Local Leaders Continue to Oppose Seizure of Funding

The Associated Press reported last week that the state's town and city governments had about $1.02 billion in reserves, while the counties held an additional $1.3 billion.

North Carolina is experiencing a $900 million budget shortfall for the 2001-02 fiscal year. To solve the problem, Easley has been taking money from a variety of sources, including the funds allotted to N.C. municipalities and $313 million from the state's own reserve funds.

Municipal officials statewide have expressed concerns that a decreased allotment of state funds will force them to remove money from their own budgets.

Easley's plan requests that $95 million be withheld from local governments to make up for a business inventory tax that was eliminated within the last decade. Counties usually receive two-thirds of this money.

Franchise taxes and other shared taxes, totaling $114 million, are also being withheld from city and town governments.

According to a press release from the City of Raleigh Public Affairs office, Raleigh has a $78.7 million fund balance, the highest of any municipality.

But the city stands to lose more than $8.1 million from Easley's cuts.

The press release also states that the cuts might delay Raleigh's Neuse Basin Environmental Program and traffic signal system upgrades. Studies, including one on improving traffic, might be delayed.

But Raleigh City Manager Russell Allen said that with the cut in funding, plans for wetlands to combat pollution of the Neuse River look dim.

"They will not be possible if we have to dip into our funds," he said.

Allen said he does not think the city should be held responsible for the state's problems. "It is not reasonable to punish us for their lack of planning," he said.

Allen added that the city's fund balance was set aside for specific purposes. "It is not just hoards of money sitting around," he said.

Margot Christensen, public affairs director for the N.C. League of Municipalities, said the group has some hope that Easley will return the funds but added that local governments must look at the reality of the situation.

"We have to assume the money is not coming," she said. "We will go ahead and reduce spending now."

She also said she thinks it is not fair to withhold reimbursements. "The money is due to (municipalities) for local purposes," Christensen said. "State law requires certain amounts of savings in reserve."

But Easley's press secretary, Fred Hartman, said he thinks local governments and the state will get through the budget crisis. "We will work between now and then to make this as painless as possible," he said. "We all live in the state."

Hartman also stressed that North Carolina is experiencing side effects of the national economic slump.

"Actually, this is not a state or local issue," he said. "It is a national issue."

Hartman added that he thinks by taking away funding, Easley is just doing his job. "He is constitutionally responsible to balance the budget however possible."

The State & National Editor can be reached at stntdesk@unc.edu.