Spending cuts and a tax rate reduction were among the goals emerging from the annual retreat of the Moore County Board of Commissioners.

However, economic reality, state law and unfunded mandates may prevent that when it's time to prepare the 2010-2011 budget.

The commissioners agreed at their Thursday session on a goal calling for a 2 percent spending cut but differed on whether another tax rate reduction would be wise in this uncertain eco-nomy. They all agreed that departments and other agencies receiving county funding should be treated equally when it comes to budget actions this year.

"We need to be very cautious," said Commissioner Cindy Morgan. "I don't want to raise taxes by any means, but we face unfunded mandates, and we're already in the hole in some areas."

Morgan, who is vice chairwoman, was referring to revelations of continuing sharp cuts in state funding to the public schools and the community college and the likelihood of the state shifting some expenses in other areas to local governments and reducing some reimbursements.

These losses are in addition to reduced property tax and sales tax collections, lower earned interest and increased costs related to operation of new school buildings.

Morgan expressed interest in cutting spending by 3 to 5 percent but was more cautious about the tax rate, which she said should be held at the present level or cut no more than 1 cent. The board cut the tax rate by almost 2 cents, including a cut in the Advanced Life Support special tax, for the 2009-2010 fiscal year.

Commissioner Jimmy Melton said he would like to aim for a 5 percent spending cut and a 2 cent tax rate reduction.

"We're in a good position compared to last year," Melton said. "Next year, if the economy picks up, maybe we can get back in the cycle."

Board Chairman Tim Lea said, "Jimmy's right, we don't have the opportunity to do the budget the way we've been doing it. We're in a different environment now. We all have relatives or friends out of work, who can't pay their mortgages and keep their cars."

Lea said the board should aim for a spending cut from 3 to 5 percent and explore the possibility of a tax rate reduction of 1 or 2 cents.

Commissioner Nick Picerno suggested that the goal be toward a 3 to 5 percent spending reduction and a 2-cent tax rate reduction.

Commissioner Larry Caddell joined Morgan in the cautious approach. He suggested that the board probably should leave the tax rate flat or not aim for a cut higher than 1 cent but agreed with a goal of 2 to 3 percent spending cut.

'Hard Knocks'

Caddell cited the findings of the Davenport report, which provided a series of possible debt structuring options with different levels of tax rates. Cited were situations calling for various tax rate reductions. However, the report indicated that such reductions might mean rate increases in a few years when bonded indebtedness payments climb.

Ted Cole, senior vice president of public finance with Davenport & Co., presented a preliminary capital funding analysis during the Wednesday session of the retreat. Davenport, which has served as the county's financial consultant in recent years, is a financial consulting firm with offices in Raleigh and Richmond, Va.

"I think we ought to be cautious," Caddell said. "I think this will be the most difficult budget year I've seen."

Lea pointed out that the Davenport report is always "very conservative," making sure that its analyses do not lead the county astray.

Melton said that in his business he has daily occasion to see the costs that people face when they have so little money.

"I know how people are hurting in this county," Melton said. "The public is taking hard knocks."

County Manager Cary McSwain had a cautious outlook and reminded the board that actions taken this year will affect actions next year and years into the future. He said the board has a good projection of revenues but should wait to determine expenditures before making budget decisions.

"Then you'll know how much we have to work with," McSwain said. "We've gotten tighter and tighter."

McSwain pointed out that legally the county cannot have a deficit and cannot spend more than it collects. If the county reduces its tax rate too much and faces a financial crisis later in the year, he warned that it might face layoffs, short weeks and other drastic solutions.

"You have to be careful," he said. "We are a creature of the state."

McSwain estimated that about 66 percent of the county budget is mandated, which means there is no choice for cuts. That leaves the remaining 35 to 40 percent for discretionary allocation.

But Lea explained that he was looking for goals, not a commitment to cuts this early in the budget preparation stage.

'Additional Cuts'

On another issue the commissioners wasted no time on discussion. They were in full agreement when Lea asked if the board wanted budget treatment to apply equally "to everyone dipping into the bucket."

Lea said he did not want a repeat of the situation last year when county employees were subjected to sharp cuts in their departmental budgets while other groups were not subjected to the similar reductions.

"Our goal is not to have to terminate anybody or go to a shorter week," Lea said.

Lea said he does not want to "penalize our own employees because of others who dip into the same bucket."

Earlier in the retreat, the board accepted information provided by the public schools, Sandhills Community College and several financial and economic experts.

Dr. Susan Purser, superintendent of the Moore County school system, relayed data showing that state budget cuts will total $1.1 million in the new fiscal year, coming on top of a $6.9 million cut in this year's budget. The schools will need $978,000 to cover operational costs for new buildings and additions.

Purser said she has been warned that other cuts may be coming and there is the potential that the schools will again be asked to return money to the state, as happened last year.

"We're bracing for that," Purser said. 'We've been told to prepare for additional cuts."

Dr. John Dempsey, president of Sandhills Community College, reported on a 2.5 percent increase, estimated at $106,000, to cover operations for new buildings and other changes, such as implementation of a new security program providing a certified police force.

Dempsey predicted an enrollment increase of 13 percent. Enrollment increased 10 percent last year.

Financial Services Director Lisa Hughes, Tax Administrator Wayne Vest and McSwain topped those reports with estimates that revenues may be down $1.3 million for the current fiscal year and are unlikely to improve in the 2010-2011 year.

Contact Florence Gilkeson at (910) 693-2479 or by e-mail florence@thepilot.com.