News: CJ Exclusives

Concerns about revenue streams for municipalities and counties a major focus of COVID-19 working group meeting

The show must go on. 

That was the theme of the Tuesday, March 31 meeting of the Continuity of State Operations Working Group, a subset of the House COVID-19 committee. Keep cash flowing, keep the lights on, state lawmakers said. 

The General Assembly plans to return for a short session April 28, and will need to be ready to hit the ground running, said Speaker of the House Tim Moore, R-Cleveland. 

The short session won’t be typical. Current state law prohibits lawmakers from voting virtually, so the General Assembly will take steps to ensure lawmakers’ safety while attending session in person. Moore floated the idea of allowing lawmakers more time to vote instead of the usual few seconds allotted. This would allow fewer lawmakers to be on the floor simultaneously.

Each working group of the House Select Committee on COVID-19 will develop recommendations addressing urgent needs relating to health care, education, economic relief, and continuity of state operations.

Counties and municipalities are concerned about slumping revenue because of the COVID-19 pandemic, representatives told the Continuity of State Operations Working Group. 

Maintaining cash flows is crucial, said Erin Wynia, chief legislative counsel with the League of Municipalities.

The pandemic will affect sales tax and occupancy tax revenue, both of which make up a large chunk of municipal and county budgets, Wynia said. 

State and county restrictions on businesses forced thousands of recent job losses across the state. Lawmakers, during an economic working group meeting early Tuesday, heard from industry insiders about the significant impact the restrictions have had on small businesses. 

The full effect isn’t yet known, said Amber Harris, the N.C. Association of County Commissioners director of government relations. 

The federal government earlier in March extended the tax filing deadline to July 15. North Carolina followed suit, though a legislative fix is needed to prevent people from having to pay interest if they file after the original April 15 deadline. 

Republican and Democratic legislative leaders, along with Gov. Roy Cooper, signaled their shared support for deferring interest on income tax until July 15 in a joint statement Tuesday night. 

Delayed tax collections will have a significant effect on government operations. The postponement will shift about $2 billion into the next fiscal year. 

The loss of $2 billion in revenue this fiscal year, plus the loss of sales and other income taxes will eat up the state’s unreserved cash balance, said Joe Coletti, senior fellow at the John Locke Foundation. 

“The governor would need to start reducing state spending immediately to help offset that reduction and the legislature may need to draw money from the Savings Reserve to limit the damage,” Coletti said. 

A large portion of the $2 billion will need to offset other reductions in revenue next year, Coletti said, or potentially go into the Savings Reserve to backfill anything withdrawn this year.

In any case, government officials will have to make difficult spending decisions, Wynia said.