County confronts $10M shortfall

The initial budget deliberations on the proposed 2024-25 budget Monday morning served as an overview of the arduous task ahead of the Sampson County Board of Commissioners, which is faced with a roughly $10 million shortfall in balancing the fiscal plan in front of them. The board called another meeting for Thursday morning to delve back in.

During the hour and a half special session Monday, board chair Jerol Kivett led much of the discussion, essentially giving what amounted to a state of the county’s finances and the outside factors — inflation and revaluation among them — that are impacting Sampson’s bottom line.

“Costs have gone up exponentially. That’s where we are today. Costs have gone up and up and up in every department,” said Kivett. “Our money is run out way before we get able to fulfill our needs, let alone our wants. So here we are today, looking at a budget that has gone from $79 million to $86 million, and we’ve got some increases in departments — I’m looking at some that are getting 30 and 40% increases.”

“Where do we want to go?” Kivett posed to the board, before asking the $10 million question: ”What do we want to do?”

The 2024-25 recommended Sampson County budget includes no proposed tax rate hike, while the rate itself is proposed to drop by 20 cents from 82.5 cents to 62.5 cents per $100 valuation, deemed the revenue-neutral rate as property values spike since the county’s last revaluation five years ago.

The 2024-25 proposed general fund totals $86,085,496, which is roughly $6.8 million over the adopted 2023-24 general fund of $79,313,859 — an 8.5% increase. The 2023-24 adopted budget was nearly 12% higher than the 2022-23 adopted budget.

Among the highlights, the recommended budget proposes a 3% cost of living adjustment to be effective Jan. 1, 2025, an increase of $531,147. Additionally, an allocation of $747,700 is being recommended to assist employees in reaching the midpoint of their salary scale. The county budget also proposes funding of $1,353 per student, which is up from the $1,324 per pupil funding in the current year.

The $86 million in general fund expenditures has already been cut down from approximately $93 million in departmental requests.

“Let the record show there have been some cuts already,” Commissioner Sue Lee stated.

The 2024-25 recommended budget proposes allocating nearly $12 million in fund balance to balance the budget. Lapsed salaries and benefits are expected to cover approximately $1.9 million of this deficit, leaving the $10 million.

“If you’re looking at any adjustments at all, where are we able to cut?” Kivett asked. “We’re telling the taxpayers you have to come up with more money. As we’re planning right now, we’re taking it out of our rainy day fund and someday they’re going to have to find a way to get with this money.”

Sampson conducted property revaluations in 2011 and 2019 before this year’s process. Those prior revals, notably the one in 2019, have been closer to neutral. In 2022, there was a $2.5 million shortfall that was eaten about the county. Last year, there was a $5 million shortfall, of which $3.8 million was the salary adjustment that came in the wake of a market study. That $4 million is now a recurring expense in salaries.

“That’s part of this $10 million we’re short,” Kivett noted.

The county has also increased its contributions to employee benefits by $1,902 per employee, which equates to $1.1 million in recurring expense each year, Kivett noted.

“These are the increases we’ve got,” he remarked. “So not only salaries, but benefits have gone up exponentially. It’s out of control. We’re not the only ones — every county is dealing with it. The problem Sampson County has is we have 30,800 people paying taxes out of 65,000 people, so half the people are not paying taxes. That puts us in a difference scenario than, say, a Cumberland and Johnston County. We have 400 people in this county paying 31% of the property taxes. You can only go to the well so long before it runs out.”

The revaluation, coupled with inflation and rising costs of operations, presents a sizable shift.

“We had 13-14 years of a neutral tax appraisal value,” he said. “We have not had a tax increase since 2014. We went all this time with a neutral tax appraisal value — didn’t increase, didn’t decrease — and then after Covid hit, it’s unprecedented what everyone has seen. We have had such increases. Opposite of what we’ve been told that we’ve raised taxes, we have not raised taxes. So, here we are today with a perfect storm.”

Based on revenue-neutral calculations, fire tax rates for districts in Sampson County as well as the Supplemental Current Expense Tax for the Clinton City Schools were similarly adjusted according to the revenue-neutral tax rate. While the county property tax rate was rounded down — from 62.9 to 62.5 cents — those rates for fire departments and schools were adjusted upward to the nearest half cent.

The revenue-neutral rate is the rate that is estimated to produce revenue for the next fiscal year equal to the revenue for the fiscal year prior to revaluation if no reappraisal had occurred.

State law requires that local governments publish a revenue-neutral tax rate in the budget following the completion of the general reappraisal of real property, a process that will now be every four years for Sampson. Half of North Carolina’s 100 counties are now on a four-year revaluation cycle. Of the remaining 50, 30 remain on the eight-year cycle and 20 fall somewhere in between five and seven years. State statute requires counties to conduct a revaluation at least every eight years.

The county has proposed as part of the 2024-25 budget to set aside $800,000 for the revaluation reserve fund.

County Manager Ed Causey explained the overarching goal when coming to the recommended budget, which was being fair across the board, especially as it pertained to the revenue-neutral rate. He mentioned the much-discussed fire tax rate, with fire officials urging county leaders in recent weeks to keep those rates as they have been, and not lower them, despite the lower rates being closer to revenue-neutral.

“With the capital needs that (Clinton City Schools) has, you can make a similar argument for not changing their (Supplemental Current Expense Tax) to the revenue-neutral rate. We agree that everybody has a wide range of concerns. We’re not discounting anybody —not any fire department, city schools, county schools, anybody. What we have tried to do with this whole process is try to be consistent with what you’re doing across the board.”

The net tax support needed to balance the budget is poised to grow by $7.6 million, under the proposed budget.

Some of the largest increases come from the Sheriff’s Office ($2.6 million); Detention Center ($1.3 million); Social Services ($1.3 million); Emergency Medical Services ($1.1 million); Current expense for local schools ($620,000); Communications ($332,626); Emergency Management ($313,357); Finance ($274,538); Administration ($248,429); and Human Resources ($210,680).

“Salaries will make up a big chunk of it,” said Finance Officer David Clack.

Kivett put the Sheriff’s Office and Detention Center budgets under a microscope. The Sheriff’s Office and Detention Center adopted budgets totaled $10 million and $5.2 million, respectively, in 2023-24. Of that $15.2 million total, roughly $11.5 million was taxpayer funded and close to $3.8 million was revenues from those departments. In 2024-25, the proposed budgets for the Sheriff’s Office and Detention Center stand at $12.6 million and $6.1 million, respectively. Of that $18.7 million total, of which roughly $15.4 million is taxpayer funded and close to $3.4 million being revenue from those departments.

“So they actually get all the money they bring in,” said Kivett, noting the revenue amount equating with the recommended increase.

“All that money is spent in that department, yes,” Clack responded.

Commissioner Allen McLamb proposed possibly going through a budget summary that listed each department and the net tax support increases that were set to see under the recommended 2024-25 budget, from what those departments received in 2023-24. He offered that some departments should be examined for how useful they still were to the population, mentioning library and aging programs.

“I’m probably sticking my head in a big noose now. How many people use libraries now? I don’t know,” said McLamb, saying he was relaying questions from people who have spoken to him. “And I love my older people. But those things are changing; I want to make sure we’re changing with it, as far as the need and what benefits the county and our aging. These things are small, but they need attention, as does the Sheriff’s Department and all the others too.”

Kivett asked McLamb for clarification. McLamb said he wasn’t talking about closing anything down, but said the microscope needed to be pulled out to examine everything — big and small.

“One question was, does anyone get any benefit out of libraries?” said McLamb, noting some are using wifi at the locations and loitering rather than utilizing the locations. “And I’m wondering how many meals we’re doing for our aging. People just don’t go do that stuff anymore like they used to. I’m sorry but I’m being realistic. That hurts in some situations, but those are the little things, but they need our attention if it’s something that we can make better, or find a way it benefits the county more than what we’re doing.

“If it’s on here and we’re paying for it, it needs our attention,” he stated.

Commissioner Lethia Lee said those who are offering those type of comments are likely not involved in operation of the nutrition sites or libraries, or use them. Those are benefits to those communities, “lifelines to the people in smaller communities,” she said.

“In my opinion, we don’t need to be closing anything,” she stated. “We need to be finding ways to offer more things to our people.”

Causey said everything on the budget has got a constituency that values it, with the possible exception of the Tax Office, he joked.

“Going into this year, we knew there was not a lot of heart for a tax increase from anybody, and we didn’t have it,” said Causey, noting $37 million in fund balance, $24 million of which was unassigned. “We basically looked at it and said ‘if the commissioners want to have a year where we’re on an even basis, we can expend $10 million and still be in good shape.’ Now I don’t think you’ll have the luxury to go in there for ($10 million) next year, but it does give us the opportunity to then, once you have this budget, to start the budget process right away for the next year. We were trying to set the stage and give you something that was workable.”

The board will continue deliberations on the proposed budget this Thursday, June 13, at 10 a.m. in the administrative boardroom.