As the North Carolina General Assembly struggles to make ends meet, members of the Durham County Board of Commissioners are complaining that the state is solving its budget dilemma by simply transferring the financial burden to counties.
The tax plan, which passed the House of Representatives in August and is currently under consideration in the Senate, calls for the state to end payment of $333 million in reimbursements to counties--$6.5 million of which would be due Durham County. The state would give counties the option to raise sales taxes by a half cent to compensate for the loss.
The reimbursements are a form of transfer payments to the counties begun in the early '90s to compensate for the state eliminating counties' intangibles tax.
"It basically is no option for us--when we lose that kind of money, we are forced to raise the tax," said Ellen Reckhow, vice chair of the county board. Reckhow added that unless lawmakers make sure the budget is carefully worded, the county could actually lose money because it must share sales tax revenue with the city.
Becky Heron, another county commissioner agreed, saying it was unfair that the state's budget difficulties might hurt the county. "Somebody is obviously not minding the books over in Raleigh, so what they do is come down on the backs of counties, which is not right," she said.
Rep. Mickey Michaux, D-Durham, said the sales tax-reimbursement swap would help counties. "This would help them make up [for lost reimbursements] and plus give them a little bit extra."
Rep. Paul Luebke, D-Durham, agreed with Michaux. He said that he was confident the General Assembly would pass an agreement ensuring the counties would not lose revenue in the short term.
He added that by July 2002, he expects sales tax revenues will surpass what Durham would have received in reimbursements.
Luebke also said he is confused by county commissioners' opposition to the plan. "This swap, a local option sales tax, was requested by the North Carolina Association of Counties," he said."I'm surprised now to have the county commissioners not happy with the proposal because they knew that their association was making this offer to us."
Luebke explained that the state association of counties had argued that a sales tax would offer the counties a steadier income stream than reimbursements.
"That was the argument that we assumed was accepted statewide," he said. The state did not actually pay the counties reimbursements this year, forcing Durham County to invoke a hiring freeze and halt all non-essential expenses.
But Joe Bowser, a county commissioner, said that the counties wanted the sales tax for additional revenues, not just a more certain income stream. "It appears to me that the state of North Carolina did not understand what the counties were seeking. We were seeking sales tax to get additional revenues," he said.
Reckhow added that Durham had not expected to lose the reimbursements, but wanted an additional one-cent sales tax increase on all non-grocery purchases to compensate for the increased number of services she said the county was now responsible for.
The county is responsible for funding education and hoped for a larger revenue stream to fund infrastructure improvements.
Vernon Malone, a Wake County commissioner, said that although the state association of counties did request both to keep the reimbursements and to be given the option to raise sales taxes, the package was never likely.
"All along it was obvious that the sales taxes would replace the reimbursements. It would be a real coup if the state were to continue to give the reimbursements and [allow the counties to implement] a tax that they desperately needed for themselves," he said.
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