Town to Request Return of Funds Withheld by State

The state government is withholding more than $1.04 million in funds designated for Chapel Hill because of a projected $900 million state budget shortfall for the 2001-02 year. Foy said the move has sent the town's budget into crisis.

The reduction in funds comes on top of a $975,000 shortfall that forced the Chapel Hill Town Council to cut programs in November. Officials say the state cuts, which Easley announced Tuesday, will cause more already under-funded programs to be cut significantly.

The N.C. Metropolitan Coalition, a voluntary organization made up of state mayoral offices, is meeting with Easley on Wednesday to demand the return of funds to local governments.

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

Foy said the withheld money represents 6 percent of the town's budget for the next five months, adding that the state renegging on its promise makes it difficult to run a balanced budget. He also said the state did not consult local municipalities before announcing the specific budget cuts.

"We've planned for this money in our budget," Foy explained. "This behavior by the state makes it impossible to plan our budgets."

Foy added that the state is acting irresponsibly by putting the burden of its budget shortage on individual municipalities.

"We have been careful over budget responsibility," he said. "For the state's budget problems to be shoved on to us is unfair. This is a state budget crisis, not a local government budget crisis."

Jim Baker, Chapel Hill's financial director, added that the finance department will be meeting with the Town Council on Monday to discuss further cuts in services for the rest of this fiscal year.

"(The budget) is not doing very well," Baker said. "Earlier in the year, we made a report to the council and gave them a list of things we need to do to shorten our expenditures by $975,000.

"Right now we're trying to assess the impact of the additional $1 million shortage."

Town Council member Pat Evans said Chapel Hill might be forced to raise taxes in the next fiscal year to provide services essential to the town's daily life.

"I think the state, county and town will be reducing services and increasing taxes," Evans said.

"Some of the services that need to be rendered are very critical, such as education, fire, police and public works," she added. "Capital improvements will have to be delayed."

Foy said the town, unlike the national government, is unable to run on a budgetary deficit and that hard choices must be made in the short term.

He said the town will have a hard time bouncing back from this loss of state dollars.

"We don't have any way to raise funds in this short of time, period," Foy said. "We can't raise taxes at this time. I don't know what we're going to do."

The City Editor can be reached at citydesk@unc.edu.