06/02/17 — County to adopt interim budget

View Archive

County to adopt interim budget

By Steve Herring
Published in News on June 2, 2017 7:10 AM

Wayne County commissioners say they will adopt an interim budget in an effort to forestall a possible 2.46 cent property tax increase that would be needed to replace nearly $4 million in state school funding over the next two years.

Commissioners want to wait to see what state lawmakers do about a provision in the House budget proposal before settling on a local tax rate.

The tax increase would not be needed should state legislators change wording in the provision that would exempt Wayne County from having to meet the tax  rate threshold required to receive the money.

The provision provides an exception for counties where military bases are located as long as the county schools have an average daily membership of more than 23,000 students.

In those cases, the schools would receive the same amount of supplemental funding for low-wealth counties that they received in fiscal year 2012-13.

The provision is not in the Senate version of the budget.

Commissioners are lobbying to not only keep that provision in the final budget, but to have the number reduced to 17,000 or 17,500 in order to fall under the exemption. Wayne County's current average daily membership is around 18,826.

Wayne County is designated as a low-wealth county by the state making it eligible to receive state low-wealth education funding.

In the 2015-2016 school year the school district received nearly $7 million in low-wealth funding.

The state bases the funding on a a complicated formula comparing the  county's tax rate to the average effective tax rate for North Carolina.

The average effective tax rate is a "moving target" because it has been gradually rising over the past several years, Wood said.

Increasing the tax rate by 2.46 cents per $100 of property value would be less expensive than chasing the formula, Wayne County Manager George Wood said.

Trying to meet that formula would require an initial tax increase of 2.55 cent increase, he said.

It would then require increases of close to 1 cent per year in order to retain eligibility under the formula, Wood said.

"That is not the solution as it would result in higher taxes than what we would lose from the formula," he said. "By delaying the (tax) levy we can assure that we know whether we have to fund this gap in revenue and set the (tax) rate accordingly.

"This (2.46 cent increase) would guarantee that there is no extra revenue as we would be replacing only the lost state low wealth revenue."

The 2.46 cent increase would generate the $1,979,878 that would be lost annually because of the county's failure to meet the funding threshold.

It also would eliminate the need for the additional tax increases that would be required to continue to meet the formula, he said.

The county is required by law to adopt a budget before July 1. But state law does allow interim budgets.

Taxes are not levied in an interim budget, meaning the county can delay setting a tax levy.

"We will do an interim budget," Wood said following the board's Wednesday afternoon budget work session. "We will not set the tax rate for 30 days. That should buy us enough time for the state to finish because we are hearing that the House is getting ready to do its budget. Then they (House and Senate) will do the conference committee.

"We are hopeful they will even get it done before June 30th, but very hopeful they will get it before July 31st. Then as soon as they adopt a  budget, we will hold a special meeting adopt out regular budget and set the (tax) levy."

Should the state take longer in adopting its budget, the county could extend its interim budget by adding another 30 days, Wood said.

If the exemption makes the state budget, there will be no need for a tax increase. If it doesn't, then commissioners will need to decide what they want to do, Wood said.

That could be the 2.46 cent increase, or commissioners could decide to replace the lost funds with a mixture of a tax increase and fund balance, he said.

The board could go back to the state every two years to try and get the exemption should it fail to pass this year, Wood said.

"But we feel pretty good about getting it," he said. "We have just got to wait and see. But this buys us time."