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NORTH CAROLINA ASSOCIATION OF COUNTY COMMISSIONERS ALBERT COATES LOCAL'GOVERNMENT CENTER E]215 NORTH DAWSON STREET E] PO BOX 1488 RALEIGH, NORTH CAROLINA 27602-1488 E] TELEPHONE 919/715-2893 DFAX 919/733-1065 January 31, 2002 The Honorable Michael F. Easley Office of the Governor 20301 Mail Service Center Raleigh, North Carolina 27699-0301 Dear Governor Easley: We understand the serious problems facing the state with. regard to the current year budget. County budgets are being negatively affected by the same economic forces. Therefore, we urge you not to delay or sequester the payment of $95 million in inventory tax reimbursements scheduled for April 30, 2002. The current economic slowdown not only has caused a decline in county sales and property tax. collections, but also increased the need for county services to unemployed and economically disadvantaged citizens. Counties, like the state, also face escalating Medicaid cost increases. With the projected shortfall in the state's Medicaid estimates, county Medicaid payments may rise 33% or $95 million over last year's projections. Our poorer and more rural counties find it increasingly difficult to pay for their residents' Medicaid services--Berrie County, with 32% of its population Medicaid-eligible, must use 30¢ of its property tax rate to pay for the county's share of Medicaid. Few resources are left over to fund schools, public safety, and other critical county services, leaving the county at a major economic development disadvantage. The counties, like the state, have taken action to respond to the fiscal crisis." Sixty counties raised property tax rates in this budget year, with rate increases averaging more than 5 ¢ per $100. Scotland County, with over 30% of its population eligible for Medicaid, raised its rate by 1.7¢ to $1.10. Mecklenburg County raised its property tax rate by nearly 11 ¢. Robeson County, with 33% of its population eligible for Medicaid, added 10¢ to its rate. Now over 31¢ of Robeson County's tax rate, representing 14% of its budget, is used for Medicaid alone. Counties reported laying off staff, deferring capital expenditures, and enacting across the board budget cuts in order to balance their budgets this year--a loss of the promised inventory tax reimbursements further jeopardizes our counties' fiscal health. In addition, counties are already considering drastic action to contain expenditures within the next year's budget. For example, Mecklenburg County is asking all of its departments, including its public school system, to cut 10% from their current allocations.