North Carolina is broke. In case you haven’t heard, the state is facing a deficit of nearly $1 billion. To stem the rising red tide, Gov. Mike Easley has declared a state of fiscal emergency and has withheld more than $200 million, all told, in scheduled payments to cities and counties around the Tar Heel State.
Locally, Asheville has lost about $3 million; Buncombe County is out about $2.1 million; and Montreat, Weaverville, Woodfin and Biltmore Forest have collectively lost about $400,000 in budgeted state funding. Compounding the problem is the fact that these cuts, announced in mid-January, affect the current fiscal year (which was already more than half over when they were announced).
In Asheville, the state’s move has forced drastic budget cuts — including a hiring and capital-expenditures freeze, eliminating the Parks and Recreation Department’s summer youth program, and a halt on paving and street-repair projects.
To highlight the gravity of the situation, local political leaders staged a March 25 press conference at Asheville City Hall. Underscoring the extent of the damage caused by Easley’s move, they called on the legislature to pass a “menu of tax options” municipalities could use to avoid the dreaded last resort: a property-tax increase.
In attendance were Asheville Mayor Charles Worley, Buncombe County Board of Commissioners Chairman Nathan Ramsey, Black Mountain Mayor Mike Begley, Montreat Mayor Letta Jean Taylor and Weaverville Mayor Bett Stroud.
Begley sounded a note that was echoed by all of the leaders present: “We can’t emphasize enough that this is our money.”
He was referring to the fact that the money withheld was no mere government handout. Instead, it consisted of locally collected taxes that are held by the state — which then returns the local portion to the municipalities. This year, however, the governor decided that the state would simply keep the money.
“We are deeply concerned that these revenues have become an easy target and may be confiscated again next year, as the state’s budget deficits are expected to continue,” lamented Worley.
State leaders, said Ramsey, have described Easley’s decision to withhold the funds as a way to reduce the deficit without affecting education in the state. But education, Ramsey noted, is the number-one expense in the county budget, and the loss of the expected funds has prompted a 3.5 percent decrease in school funding and shortened library hours.
If there’s a light at the end of this tunnel, said Worley, it’s an oncoming train. Because unless there’s some drastic change, the state’s budget deficit next year could approach $1.5 billion. And that, said the mayor, could cost Asheville up to $6 million — which could force a property-tax increase, shut down community centers and other facilities, and severely impact infrastructure maintenance and other city services.
Worley and the other assembled leaders reiterated that, currently, property-tax increases are the only revenue tool available to municipalities. That explains the request made by municipal leaders to local legislative delegates to push for other revenue-increasing options, such as a local sales tax, a land-transfer tax or a prepared-food-and-beverage tax — all of which would be more appealing to municipal leaders than raising property taxes.
As Begley put it, municipal leaders “are the ones on the firing line when we raise [property taxes].” He also noted that a prepared-food-and-beverage tax, for example, would shift part of the burden from residents to tourists.
With the budget-planning season fast approaching (the new fiscal year begins July 1), Worley cautioned, “We’re scared to death about how you even go about budgeting for next year.”