WINTON – Two days after Hertford County Manager Loria Williams informed her bosses – the county’s Board of Commissioners – of the bad news, a ray of hope was unveiled in the state capital.

At its Feb. 23 meeting, the Board of Directors of the North Carolina Association of County Commissioners (NCACC) adopted a resolution opposing any attempt to reduce county revenues for school capital needs or to shift additional costs to counties to balance the state budget.

Forty-eight hours earlier (Feb. 21), Williams updated the county commissioners of the local impact that Governor Bev Perdue’s proposed state budget would have at the county level. Listed among Perdue’s priorities to reduce the state budget is taking more from the proceeds heading to counties from the state lottery (lowering, from 40% to 10% of net revenues, the lottery funds earmarked for school construction); permanently eliminating the corporate tax set aside annually to help with school construction; shifting some of the benefits package funding of state-employed school workers to the county level; and forcing county government to assume the costs associated with replacing school buses.

“The budget proposal would lower the 40 percent set aside of net lottery receipts for school construction to 10 percent, leaving only $45 million for county school capital investments,” the NCACC said in a recent memo sent to all county managers statewide, one shared by Williams with the commissioners at their Feb. 21 meeting. “We anticipate that lottery funding at this level will not even cover the required debt service commitments for public school capital projects.

“Furthermore, a recommendation to permanently eliminate the corporate tax set aside for school construction would reduce school capital dollars by another $72 million,” the memo continued. “Despite these revenue losses, the governor’s budget proposes to shift school bus replacement funding to counties, adding yet another school capital expenditure of $57 million annually.”

Another part of Perdue’s budget proposal is to shift the claims payment and defense of workers’ compensation for state-funded school employees to counties, estimated at $35 million annually. Per discussions with the state budget office, all state support for workers’ compensation would end as of July 1, 2011, including the defense costs and payments for ongoing claims.

“While counties now pay for the workers’ compensation costs for county-funded school employees, along with other employee benefits such as retirement and health, shifting a benefits cost for state-funded employees to counties would set a very troubling precedent,” said the NCACC in its memo. “Counties have grave concerns about assuming this liability for employees that they do not hire, train or supervise.”

The governor’s budget also proposed to shift workers’ compensation claims and defense costs for state-funded community college employees to counties, who currently have no funding responsibilities for those employees. The budget proposal would also shift $4.6 million in defense and claims payment for local school tort claims, mainly arising from school bus accidents.

According to the NCACC, the state will pass along $345 million for the counties to assume.

That prompted the NCACC’s Board of Directors, which includes Hertford County Commissioner Howard Hunter III as its First Vice-President, to go on the record to oppose the loss of county school construction dollars and the shift of state school funding responsibilities to the counties.

At its Feb. 23 meeting, the NCACC Board adopted a resolution, one that proclaimed that counties spend more than $1.5 billion annually for public school capital needs and $2.5 billion for public school operating expenses; and that the counties rely on local sales taxes, property taxes, the county share of lottery funds and its share of corporate income tax to help fund public school capital needs and have issued public debt based on these revenue streams.

“Counties have lost more than a quarter billion dollars in lottery and corporate income tax school construction funds over the current biennium and the Governor’s budget proposal permanently eliminates the county share of the corporate income tax and reduces the county lottery share by 75 percent, costing counties more than $200 million per year in revenues dedicated to public school construction needs,” the resolution read.

It further proclaimed that the overall cost shift to counties of $345 million in 2011-12 alone, requiring counties to raise property taxes to manage a loss of this magnitude.

Copies of the resolution were forwarded to the members of the General Assembly in the NCACC’s effort to make them aware of its opposition to “these unprecedented changes in county responsibility and the use of county revenues to balance the state budget.”

On Wednesday of last week, the House and Senate Appropriations subcommittees received spending targets that set an overall spending cap on budget areas such as Education and Justice and Public Safety. Accompanying the spending targets was general guidance to the subcommittees to focus on core services and jettison or reduce ineffective programs, nonprofit funds, boards and commissions, vacant or temporary positions, and layers of management.

The Education area would see additional reductions of $763 million over the governor’s budget proposal, with an overall reduction in current levels at roughly 11 percent. County lottery funds would be a “full chairs” item, meaning the subcommittee could recommend where overall lottery funds would be spent but the full Appropriations chairs would make the final decision. More at Four and Smart Start could be consolidated or eliminated, education salary schedules could be based on performance, and university enrollment could be capped.

With Health and Human Services at $379 million less than what the governor proposed, the fate of the Health and Wellness Trust Fund would remain with the full chairs.

Justice and Public Safety would have $140 million less to spend than what is proposed in the governor’s budget.

The governor’s proposal to consolidate Corrections, Juvenile Justice and Crime Control and Public Safety into a combined Department of Public Safety will also receive consideration.

Natural and Economic Resources would take a 21 percent reduction from what the governor proposed, with funding for the Clean Water Management Trust Fund, the Golden Leaf Fund, and the Tobacco Trust Fund delegated to the full chairs and outside of the subcommittee’s spending targets.

Transportation is charged with redirecting at least $100 million in current funds for maintenance and resurfacing, and is asked to evaluate whether its current funding model supports the right transportation programs and projects.

“With a total budget reported to be $18.5 billion versus the governor’s proposal of $19.9 billion, House and Senate leadership continue to send a clear signal that the 1 percent sales tax will expire on schedule on June 30. And, what’s encouraging, they continue to stress that the state’s budget problems will not be pushed down to local governments,” the NCACC memo concluded.