City & County Government

By the Numbers 2003: What Government Costs in North Carolina Cities and Counties is the fourth in a series of studies that examine local taxes, fees, and charges in every North Carolina communities. Charlotte ranks first among major cities in combined local government costs per person, with Hickory, Durham, Wilmington, and Cary rounding up the top tier. Among large urban counties, Durham and Mecklenburg have relatively high costs as a percentage of personal income.

Former Indianapolis Mayor Stephen Goldsmith said that one of the greatest challenges facing local government is how to do more with less. This is certainly true for local governments in North Carolina. In the past two years, they have had to adjust to significantly more stringent budgetary constraints. This was brought on, in large part, by Governor Easley’s decision to withhold state reimbursements to counties and municipalities. Because of this localities are being forced to find innovative ways to balance their budgets.

Gov. Easley's new incentives proposal would put political appointees into the position of doling out special tax breaks that amount to grants of taxpayer money to private businesses. Because of the unpredictable nature of a free-market economy, such a policy cannot claim to boost overall economic growth. A better policy would be to reduce North Carolina sky-high marginal tax rates on personal income, investment, and capital gains - which are among the highest in the country.

The N.C. Senate is debating its proposed budget, which would reduce authorized FY 2002-03 spending by $585 million. Most of the $1.4 billion budget gap, however, would be closed with one-time revenues, including tax hikes and fund diversions, that will reportedly create a recurring deficit in FY 2003-04 approaching $800 million. Some leaders propose closing that gap with tax hikes, too, meaning that the total annual tax burden will have grown $1.4 billion from 2001 to 2003.

In recent months, public officials have made a range of statements in an attempt to explain persistent state and local budget woes. Many of these assertions do not square with the facts. A collection of graphs and tables shows clearly that North Carolina government is out of line with neighboring states in spending, employment, and taxes. Moreover, revenue growth outpaced personal income growth during the 1990s, while debt service costs are projected to triple over 10 years.

The Southern Appalachian Mountain Initiative (SAMI) is a consortium of eight Southeastern states, including North Carolina, and several federal agencies. It is now beginning to publish its research, more than a decade in the making, and will likely help to shape the debate on air quality for years. State policymakers should be cautious in interpreting SAMI data and analyses, however, due to troubling signs that it may not be looking at both sides of the regulatory equation.

The American Lung Association's recent report on ozone fueled a media frenzy in North Carolina, with repeated suggestions that the air in the Triangle and Charlotte was "more polluted than New York City's." The truth is far different. Due to a misleading grading system and a faulty and selective reading of data, the ALA report provides little useful information to North Carolinians about the quality of the air they breathe, and falsely suggests that pollution is increasing.

For all the talk of a fiscal crisis this year and the need to tighten the belt of state government, Gov. Jim Hunt's proposed adjustments to the FY 2000-01 budget would hike General Fund operating spending by nearly 7 percent, vastly increase state debt, and deplete state savings accounts for many years to come. The budget also contains many new items of questionable merit. North Carolinians should not be surprised to see sizable tax increases in the future as a result.

Responding to calls for billions of dollars for capital needs in the UNC and community college systems, legislative leaders are considering asking voters to approve a $3.1 billion bond referendum this November. Because the bonds would more than double the state's debt burden and generate a debt service budget approaching $600 million in four years, taxpayers have little reason to believe that a bond issue of that size won't result in tax increases in the future.