Governor’s budget proposal contains major shift to counties in public education funding

Via NC Assoc. County Commissioners

The budget proposal unveiled by Governor Beverly Perdue on Thursday would cause a major shift in how the state’s public education system is funded, with the state forcing more responsibilities to county governments to help balance the state budget, said NCACC Executive Director David F. Thompson.

Not only does the proposed budget shift responsibility to pay for replacement school buses ($56.9 million), it also takes the unprecedented step of forcing counties to assume the workers’ compensation costs for state-paid public school employees ($34.6 million) and community college employees ($1.7 million). The proposal also reduces state-funded positions in the local public school systems for administration, academic support and other non-instructional support areas, which will put additional pressure on counties to fund these positions.

“Counties have been assured by lawmakers that the state will not attempt to balance its budget by pushing down unfunded mandates and additional responsibilities to counties or by taking county revenues,” said Thompson. “The current budget proposal does both, and we will be working with the House and Senate to address our concerns.”

Statutorily, counties are supposed to receive 40 percent of lottery proceeds for school capital needs. The proposed budget uses most of the county share of lottery proceeds for state education expenses and eliminates the county share of the corporate income tax dedicated to the Public School Building Capital Fund. These moves add up to a loss for counties of almost $200 million per year in much-needed school construction funds.

Many counties rely on the lottery proceeds and corporate income tax revenues to pay existing debt service on recently built or renovated schools. Losing this revenue will cause a direct hole in county budgets that must be filled with other county revenues or additional cuts in services.

“We understand the state is facing a significant budget gap, but pushing down unfunded mandates to county taxpayers and taking county revenues is not the best solution,” said NCACC President Joe Bryan, a Wake County Commissioner. “It might ease the pressure on the state budget, but it will put undue strain on 100 county budgets and force many counties to consider property tax increases to make up for the lost revenue. Wake County could lose as much as $10 million in lottery revenues.”

Johnston County, one of the fastest-growing counties in the state, uses its lottery and ADM funds to help pay down more than $30 million of existing debt service for public schools each year. In 2009, the county received more than $5 million as its share of lottery funds. Under the current budget proposal, the NCACC estimates the county will receive less than $1 million for public school construction in 2011-12.

“We have had an aggressive building program in recent years to keep up with our rapidly growing population,” said Johnston County manager Rick Hester. “We are counting on those lottery funds that were promised to counties to help us pay our debt service. We lost almost half of what we had budgeted for this year when the state reduced the lottery appropriation, and this proposal could cost us $3.5 million next year.”

“We know that the state is faced with some difficult choices, and we hope the governor and General Assembly will take into consideration our concerns as they craft the final state budget,” said Thompson.

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