It’s hard to open a newspaper, flip on the computer, or turn on a television without being inundated with news about COVID-19, often by stories detailing how bleak the economic outlook is becoming for individuals and businesses of all sizes.
Another economic victim not covered as much are local governments, who are losing significant revenue with the loss of sales tax dollars, user fees and other revenue sources.
State Treasurer Dale Folwell said that is of grave concern to him, with many localities around the state in poor financial shape before the pandemic.
He made his comments during a recent interview with The Mount Airy News, in which he talked about balancing public health concern with economic concerns, the safety of the state pension plan, the relative fiscal strength of the Mount Airy budget, and his frustration with Gov. Roy Cooper’s pandemic response that, he claims, has been undertaken without any input from the state’s Council of Government.
That body consists of the governor, lieutenant governor, secretary of state, auditor, treasurer, superintendent of public instruction, attorney general, commissioner of agriculture, commissioner of labor and commissioner of insurance.
While the body, as a whole, has no legislative power, it’s sometimes used as a way to keep the various branches of government coordinated and informed on policies coming from the governor’s office.
”I’m highly concerned because people are not in motion, and therefore they can’t consume,” he said of the economic fallout from the statewide shutdown, and how that translates to local and state revenue. “When they can’t consume, everything stops. … A lot of the monies local government depends on are not going to be there, starting with the gas tax, permit fees, sales tax, tourism dollars, occupancy tax.”
Folwell, a COVID-19 victim who is still recovering from his bout with the virus, said he understands the need for caution and for health concerns, but at some point that has to be balanced against economic damage the shutdown is inflicting on the state and localities.
“We’re now facing an economic virus. It seems that any time we’re facing an economic virus, it’s lower income people who get hurt the worst. We have to work within all of our duties and responsibilities to make sure … we are doing everything we can to not create more economic inequality, which is what I’m fearful is about to happen.”
While he thinks it’s great that a number of businesses have been able to shift gears and allow their people to work from home, that hasn’t been the case for vast numbers of individuals in North Carolina.
“There’s a lot of people, their way of making a living is with their hands, back and feet.” And those people, he said, are the ones who stand to be hurt the most, over the longest term, by business shutdowns.
A direct concern of his, because his office works with local governments, is how the pandemic shutdown will affect city and county governments across North Carolina.
Many of those, he said, were already having a hard time keeping up with growing expenditures, or in some cases were just spending too much and not preparing for an eventual rainy day. Now, a good chunk of the revenue those governments need is drying up. In a worst-case scenario, Folwell said the state would have to step in and oversee a locality’s finances.
“The Local Government Commission tries to work with (a) community … so it’s not getting to that point,” he said of the state body which oversees debt requests and other functions by all local governments in North Carolina.
An example would be if a local government wishes to incur debt, it must first approach the commission with a request to do so, outlining how much it wants to borrow, why, and how it will be paid back. Such a case occurred here in the city in March 2018 when the commission rejected a Mount Airy plan to borrow roughly $13 million for the Barter Theatre Project, stating the plan was too risky and could place an undue burden on city taxpayers.
The commission will likewise step in and work with local governments if the state body sees a locality whose annual budget has too slender of a year-end balance, or reserve fund.
The treasurer offered praise to both Mount Airy and Surry County in this regard, given that both meet or exceed the state minimum for year-end balance. The state requires at least 8% of the total general fund to be available. Mount Airy, by contrast, stood at $9.3 million at the June 30 end of the most previous fiscal year, on a total budget of $13.5 million. Surry County had $12.1 million in its fund balance last June on a budget of $79 million (better than 15%).
“I applaud Mount Airy and Surry County. There is a law that says you have to have 8%, but they have managed their finances much more conservatively,” which positions them to weather the shutdown far better than some other local governments in the state, he said.
With many local governments struggling, Folwell said residents can help. The state has granted extensions on paying some taxes, on renewing automobile registrations, and similar measures.
While those measures are meant to help folks who are struggling because they are out of work or on reduced hours, for those who are still working and can afford to pay, Folwell urged them to go ahead and do so.
“All of that money for property taxes, none of that goes to the state, all of that goes to the county, the city, to the volunteer fire departments. If they’re in the financial position to do so, if they really want to help their communities, they need to do that as soon as possible,” he said of paying those taxes and fees.
Folwell said one concern government employees at all levels in North Carolina don’t need to have is about the health of the state retirees pension plan.
Locally, Folwell’s office said 486 Surry County residents are receiving benefits from the plan, with an estimated $7 million in annual retirement benefits flowing into their checking accounts.
That money, he said, is safe.
Folwell said his office manages the plan conservatively, which has been key to it riding out the current economic downturn.
“Even with the extreme volatility we’ve experienced over the past two months, the plan is down just 3%. That’s a tribute to the conservative way we’ve managed this, we don’t have a crystal ball, we don’t gamble.”
Four months ago, Moody’s Investor’s Service, one of the world’s foremost bond and financial rating services, rated the North Carolina Pension Fund “one of the best plans in the US to withstand an economic shock,” Folwell said. “With all the stress that people and uncertainty that people are facing, one thing they don’t need to be worried about is the safety and security of the North Carolina and local pension system,” he said.
Frustration with Governor
As a COVID-19 survivor, Folwell said he understands just how serious the sickness can be. But he also believes there is a balance needed between health policies and economic policies. He doesn’t pretend to have all the answers, but he is frustrated that, in his view, Gov. Cooper is listening mostly to health professionals without due consideration to other factors before issuing some of his recent executive orders.
He says Cooper has yet to talk with the Council of State regarding the pandemic and his orders to close down much of the state.
While Cooper is a prominent Democrat and Folwell — an eight-year legislator who has also held other statewide offices before he was elected to his current post in 2016 — is a Republican, he said this goes beyond political lines.
“He has not convened the council of state at all, none of them, not the the Democratic state auditor, the Democratic attorney general, the whole entire council of state has not had a real debrief. We are required to get our information from his press conference. … We need to have transparency and communication.
“People do not care what political party you’re a member of, when it comes to their concern of food, jobs, and livelihood, they just want their problems fixed. Any time you challenge an assumption, everyone comes back and says it’s political. When it comes to jobs, food, livelihood, it’s not political.”
That, he said, is foremost on his list of priorities right now — just getting the governor and the council in the room together, to put together what he believes would be a better, stronger plan for North Carolina.
“We’re trying to convene a council of state meeting specific to this issue. Until we have that discussion, we can’t turn these politics into productivity. We have to have that discussion before we can get the state more productive again.”