Paying for Local Government
Learning Objectives
- Understand how the North Carolina Local Government Commission oversees municipal and county finances
- Describe the revenue streams for local governments
- Discuss different expenditures local governments make
- Consider how local government budgets shape your community
Local government services and programs cost money. Cities and counties must pay the people who work for them and provide the buildings, equipment, and supplies for conducting the public’s business.
In North Carolina, local government services and programs cost billions of dollars each year. In fiscal year 2018, North Carolina county governments spent almost $15 billion, and North Carolina municipalities spent about $11.2 billion, to provide services for the people of North Carolina. Within limits set by the state, local officials are responsible for deciding what to spend for local government and how to raise the money to cover those expenses.
The State of North Carolina sets strict requirements that local governments must follow in managing their money. However, this was not always so. During the 1920s, many cities and counties in the state borrowed money heavily. When the stock market crashed in 1929 and thousands of people lost their jobs, many local governments went even more heavily into debt. By 1931 the state’s local governments were spending half of their property tax revenue each year on debt payments. More than half of the state’s cities and counties were unable to pay their debts at some time during the Great Depression of the 1930s.
To restore sound money management to local government, the General Assembly created the North Carolina Local Government Commission and passed a series of laws regulating local government budgeting and finance. The Local Government Commission enforces those laws and, along with the School of Government at the University of North Carolina at Chapel Hill, provides training and advice to local government budget and finance officers.
State regulation provides a strong framework for sound money management, but local officials still have primary responsibility for using city and county funds wisely and well. Each year they must adopt a balanced budget for the coming fiscal year. During the past 70 years, North Carolina local governments have established a national reputation for managing public money carefully and providing the public with good value for their tax dollars.
At the end of each fiscal year, every local government in North Carolina prepares an annual financial report. This document summarizes all the government’s financial activity: what it has received, what it has borrowed, what it has spent, what it is obligated to spend, and what it has in the fund balance. Each local government publishes its annual financial report, has it audited by an independent accounting firm, and files a financial summary with the Local Government Commission.
The report helps local officials better understan