Foy, Easley To Face Off For Funds

Well, that might be a little melodramatic. But Chapel Hill Mayor Kevin Foy is none too pleased with Gov. Mike Easley right now. And Foy -- along with the mayors of other cities in North Carolina -- plans on telling the governor about this grievance today.

I suspect it will go something like this: "Give me my money back."

It started last week when Gov. Easley declared the second fiscal crisis of his one-year-old administration. In order to shore up a projected state budget shortfall of more than $900 million for the fiscal 2001-02 year, Easley got out the butcher knife and began cutting away.

The thing that raised eyebrows in city and town halls across the state -- including ours in Chapel Hill -- was Easley's decision to withhold $200 million in state payments to local governments. That figure is twice the amount the state withheld last year, though the state eventually returned $95 million in inventory tax reimbursements. State officials warned local leaders not to put much faith in receiving a similar late windfall this year because the state budget is in much direr straits.

The result: budget crises at the municipal level.

Chapel Hill has been trying to tally how hard this cut will hit the town. Estimates have jumped to over $1.4 million -- which would amount to 6 percent of the town's budget for the next five months. A figure that high will wreck the town's budget, forcing officials to either slash services or find other sources of revenue. Council members will meet tonight to iron out a game plan at a budget work session.

So today Mayor Foy will jet down Interstate 40 to chat with Gov. Easley. Foy will be part of a contingent from the N.C. Metropolitan Coalition. This organization, made up of mayors from across the state, will lobby Easley to return the $200 million to the local governments.

"This is money that the state collects for the local governments," Foy told The Daily Tar Heel. "(The money) needs to be passed on to the local government. We've had no way to plan for this."

Foy has two good points.

First, a large chunk being withheld comes from the utility franchise tax. This tax used to be collected by counties before the state took over the responsibility. The state is only supposed to retain 1 percent as an administrative fee. So the money is unquestionably earmarked for local use. These funds are not grants or subsidies.

Second, the state's withholding was done with no consultation or warning to local leaders. These funds from the state are crucial to local budgetary planning. Because local governments are limited in the type of taxes they can enact, this tax money from the state is a vital source of revenue.

In the meantime, the town will have to brace for yet another round of cuts.

Last year, expenditures were cut by $975,000 due to fiscal problems. Tax increases look likely to make up the loss, since the town isn't allowed to run a deficit by law.

A tax hike might not seem all that bad in Chapel Hill. But it's important to remember that not every town resident has a wallet brimming with green. In today's tough economic climate, even the "Meadowmonters" would cringe at a higher tax bill, to say nothing of those living in Northside.

And according to a study released last week by a group affiliated with the John Locke Foundation (which looked at the 2000 tax bill of residents in the 24 municipalities with a population of more than 25,000), Chapel Hill ranks ninth in total tax burden at $1,392 per person.

But hey, maybe Foy and his friends will be able to persuade Easley to pony up the dough and the town can avoid tax hikes. And if diplomacy doesn't work with the governor, the N.C. League of Municipalities is exploring a possible lawsuit against the state.

But when the mayors meet with the governor today, it'll be interesting to see if the relationship between governments at the local and state level is give-and-take or push-and-shove.

Columnist Jonathan Chaney can be reached at jhchaney@email.unc.edu.