February 27, 2009
FY09 Budget Update
As we discussed with the Board last Tuesday, the FY09 budget deficit remains fluid. On Wednesday, we learned that the state redirected quarterly distributions to counties from the ADM Fund ($5 million) and the Lottery School Construction Fund ($43.3 million) to help offset declining state revenues for this fiscal year.
The ADM Fund, which uses the acronym for Average Daily Membership, is derived from a portion of corporate income tax receipts. ADM funds are used for school construction or debt service. These funds are distributed to counties quarterly based on a complex formula. Last fiscal year, Mecklenburg County received approximately $4 million in ADM funds, which was used to pay for CMS debt service. This fiscal year Mecklenburg County has budgeted $9 million of the total 13.6 million available from the ADM Fund. We are processing $13.6 million for draw down.
Regarding lottery funds, we have received approximately $8.6 million of the $14 million we budgeted for lottery revenue this year. Since these funds are used to pay for CMS debt service costs, the permanent loss of this quarterly distribution this fiscal year would be significant. If we are able to draw down the total amount of our ADM Funds, the excess $4.6 million can be used to offset the shortfall in lottery funds. If no additional lottery distributions are given this year, we would have a permanent loss of $740,000.
We do not know yet whether Governor Perdue intends for the redirection of these funds to be a permanent reduction for counties this year or whether this is a temporary stop-gap measure to address current cash flow needs. However, based on information provided by the NCACC
, counties should not expect any additional distributions this fiscal year. The NCACC is advising counties to contact their legislators and Governor Perdue to urge that these funds be kept intact for the remainder of the fiscal year as well as next year. We are preparing a formal communication on this topic that we will send to our local delegation and the Governor. We will update the Board as we learn more details on this matter.
As you recall from Tuesday’s discussion, we have taken additional steps to reduce the remaining $11.7 million deficit in FY09. This includes cutting $2.1 million in funding to Carolinas Healthcare System, an additional $500,000 reduction in CPCC funding, and an addition $2.5 million reduction in CMS funding (totaling a $5 million reduction). As required by state statutes, the Board will be asked to approve the $5 million funding reduction for CMS at its March 3 meeting.
To address the remaining $6.6 million deficit, we also have asked the Public Library
and the Park and Recreation Department
to identify the cost savings that would result from closing respective facilities one day a week. In addition, we are informing outside agencies that we will reduce our fourth-quarter payments to these agencies by 10%. This will save approximately $115,000 in total from the 37 outside agencies that receive grant funding from the County. We will report to the Board the potential impact these cuts may have on the agencies and their clients.
Tuesday, March 3
- 3pm, Criminal Justice Committee, 11th Floor Large Conference Room
- 5pm, Dinner Meeting, CH14
- 6pm, Regular Meeting, Chamber
March 7 – 11
- National Association of Counties (NACO) Legislative Conference, Washington, DC
- Harry L. Jones, Sr., County Manager