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Last year’s New Hanover County budget negotiation was tense — I think you could fairly call it a fight — but it played out along relatively predictable party lines. With a 3-2 majority, Republicans had the votes, and pushed through their budget over Democratic objections.
This year, things are a bit more conciliatory — but also a bit more complicated, and a simple majority may not be enough to pass a budget.
Here’s the short version:
The three Republican commissioners don’t want to cut any deeper than last year’s budget, but they also don’t want to raise taxes. To make ends meet, they’re willing to tap the county’s revenue stabilization fund — a nearly $300-million nest egg left over from the hospital sale. But doing that requires four votes, and the two Democrats aren’t on board. Meanwhile, Democrats are suggesting a tax increase, which Republicans oppose, so the votes don’t seem to be there, either.
Now, this obviously leaves out some nuance and context, so let’s unpack it a little bit.
The Revenue Stabilization Fund
First, there’s the revenue stabilization fund (RSF) itself, a rare bird indeed.
The $300 million fund was set aside when the county sold New Hanover Regional Medical Center to Novant Health in 2021, along with $50 million in a separate fund for mental and behavioral health. According to the sale agreement, the RSF can be used to respond to natural disasters, like hurricanes, but also economic disasters, like severe recessions. And, even in calmer times, it can be used to mitigate tax and fee increases.
It’s uncommon for counties to have such a large standalone fund and, in general, there are limits on how much money counties and other local governments can hold in reserve (to prevent hoarding of public money that should be put to use). But, then again, most counties did not own a hospital it could sell for $2 billion. (The Endowment, which also came from the sale, is another unicorn, but that’s a story for another column.)
Initially, the fund was simply another source of potential county revenue, generating a tidy stream of interest, to boot.
Then, in response to a shooting at New Hanover High School in 2021, county commissioners held a joint meeting with the school board and a host of other officials. During the meeting, then-Chairwoman (and then-Democrat) Julia Olson-Boseman made a surprise motion, essentially calling an audible that gave County Manager Chris Coudriet the green light to tap into both the RSF and mental health fund – basically writing him a blank check for up to $350 million — in order to address community violence. It was something of a moral panic moment, with parents understandably demanding action from local officials, but Olson-Boseman’s off-the-cuff decision left a lot of unanswered fiduciary questions. Commissioners, including Democrat Rob Zapple, pushed to put additional guardrails on the RSF, requiring a supermajority vote of four out of five board members.
Since it was created, the county has freely used interest earned on the RSF, but hasn’t much touched the principal, which is still sitting at around $292 million. In 2024, Coudriet suggested using the RSF to balance the budget, but Republicans Dane Scalise and LeAnn Pierce made it clear they wouldn’t go for that; Democratic commissioners Zapple and Jonathan Barfield, Jr. both objected to eventual cuts in the budget, pointing to the RSF as an alternative.
The 2025-2026 budget
Last year’s budget is important because it helped set both the tone and policy for this year’s budget. Republicans made significant cuts to Coudriet's original proposed budget, which Democrats protested (and are still vocally unhappy with).
Because of last year’s revaluation, which dramatically increased property values around the county, the stakes were high for Republicans, who tried to cut the tax rate as close to ‘revenue neutral’ as possible, meaning that residents’ actual tax bill would increase as little as possible. But there was only so much they could actually agree on cutting, and despite reducing positions across the county and eliminating a host of programs, the budget still represented an $11 million year-over-year increase.
And accomplishing that involved pulling just over $8 million from the county’s general fund balance — a pool of money that is set aside, essentially for unexpected and emergency expenses.
Unlike the RSF, general funds aren’t just common but legally mandated. The state’s Local Government Commission (LGC), the part of the State Treasurer's office that provides oversight for county and municipal finances, requires counties and municipalities to keep a certain amount on hand; the county also has its own policies for a minimum balance (which the county had to modify in order to access it last year). In 2025, Democrats Stephanie Walker and Zapple questioned whether using the general fund could hurt the county’s bond rating; Scalise noted the balance was roughly double the level required by the LGC.
Notably, it doesn’t appear commissioners will be able to tap the general fund again this year. At a budget meeting earlier this month, Zapple asked Coudriet to “take a hard look” at any remaining accessible money, noting that he didn’t want to go below the current minimum threshold or change the county’s policy. Coudriet said it's now “very much at that bottom floor.” Thus, it’s not a useful financial lever for the upcoming budget.
Since passing the fiscal year 2025-2026 budget, some of the cuts have been manageable, but others have since proven unsustainably unpopular. For example, a few months after the budget passed, commissioners voted to restore funding for school nurses after facing public outcry from parents. The cuts to pre-K support, which for several years had been propped up by Covid funding, look like they may get reversed this year, with both Democrats and Republicans signalling they’d support restoring that funding. And affordable housing funding may also get restored, although there may be more daylight on that when it comes down to brass tacks.
In short, commissioners on both sides of the aisle are looking at adding things back into last year’s budget — while at the same time costs continue to rise, and the county’s revenue from sales and property taxes has come in a bit under what had been predicted. The county needs more money. So what will commissioners do?
“Simple math”
With the general fund pretty much off the table, there are really just a few options. Balancing the budget is “simple math,” as Pierce called it, but agreeing on the right answer might be trickier.
One option is cutting expenses, which seems generally unpalatable to everyone. There’s been no discussion that I’ve heard of making additional cuts to county staffing — and, in fact, a seeming consensus on providing increasing support for New Hanover County Schools, potentially over and above the increase already recommended by Coudriet.
Another option is the revenue stabilization fund. While Republicans have opposed using the RSF in the past, this year, Scalise argued that, given the current economy, he’s in favor of using it to avoid a tax increase. He acknowledged concerns about recurring use of the fund, but said he believed the long-term economic outlook was positive, suggesting that RSF wouldn’t be needed in the future.
Walker and Zapple, who had previously advocated for using the RSF, have said they’re averse to tapping the fund, arguing that it essentially created the illusion of a balanced budget without actually matching revenue to expenses. Both suggested that it could become a bad habit, and Zapple added that it created a “double whammy,” in that drawing down the RFS’s principal would reduce the interest revenue it generated.
That leaves the option of raising taxes, which Republicans — most vocally Scalise — have said they oppose, arguing that the current economic situation is already hard on residents. Scalise and Chairwoman Pierce have also voiced concern that raising taxes this summer could hurt the proposed (and much-needed) $320-million school bond on the ballot in November, because that will require its own tax increase next year (fiscal year 27-28).
Zapple, meanwhile, has suggested raising taxes “a minimal amount.” He said he wasn’t sure what the correct level would be — and there are, to be fair, a lot of details left to hash out — but did note at an agenda meeting on Thursday that staff “made a good case” by offering a preliminary option of a two-cent increase, raising north of $16 million. According to staff, that increase would mean about $10 per month or $120 per year in additional property taxes for someone with an average-value home.
[Note: If you want to run the numbers on your own home, look up the appraised value here, and then divide by 10,000, or just knock off four zeroes – that’s what every cent of county property tax costs you. For example, if your home is appraised at $375,000, then every cent of the tax rate means $37.50 in annual payments. At the current tax rate of 30.6 cents per $100 of property value, that’s $1,147,50 a year.]
Walker also argued that the county needed to set the tax rate at an appropriate level, noting that the county was growing and needed to provide services. When Pierce tried to summarize her stance, saying, “So, you're in favor of the tax increase,” Walker balked, voicing frustration that her argument would be clipped into “little snippets,” saying only that she was in favor of higher taxes. That’s a fair concern — I’ve seen votes for and against tax increases used against officials in vastly oversimplified ways — but at the same time, she will eventually have to vote up or down on a tax rate.
In any case, even if Walker joined Zapple in more directly calling for a tax increase of some amount, they would still need at least one other vote — and the Republicans haven’t shown much sign of interest there.
But, eventually, commissioners will have to pass a budget. And, unlike the federal government’s, it has to be balanced. So what now?
A more complex negotiation
At the end of this week’s budget discussion, a slightly exasperated Pierce asked Coudriet to bring forward several options for various tax increases.
“I'm going to ask that you bring us two or three options without revenue stabilization, because I don't hear a fourth vote. And let's not waste our time anymore, unless somebody wants to change what they're thinking,” she said.
That note led Port City Daily to report that the county was “backing away from Revenue Stabilization Fund” in favor of reviewing tax increases.
But I’m not sure that reviewing tax increase scenarios will necessarily lead Republicans to vote for one of them. Pierce hasn’t shown much appetite for an increase, and Scalise has been adamant he won’t support one.
Then there’s Republican Bill Rivenbark, who has told his critics he isn’t running again and has little to lose. He’s spent much of the budget meetings sniping from the sideline in ways that suggest he’s not fond of spending more (even his support for using the RSF was begrudging). In fact, at the end of the budget conversation on Thursday, he asked Coudriet for a more austere version without any of the additions that have been made over the last month.
“I’d like to see one with all of this gone,” he told Coudriet.
For those reasons, I think reports of the RSF option’s demise have been somewhat exaggerated.
There are dozens of scenarios, but broadly speaking I think there’s a few possible outcomes: a Democrat could change their mind on using the RSF, one or more Republicans could change their mind about raising taxes, or, in the nuclear option, Republicans could push through a budget with some significant cuts, with or without leaving open the option to come back and pass budget amendments later (in some ways like the restoration of nursing funding last year).
Certainly, we could see some combination of RSF and a tax increase, which would require both Democrats and Republicans to give a little ground. We could also see some brinksmanship as the deadline to pass a budget by the end of June approaches; Coudriet could end up with some tense last-minute budget rewrites.
And, of course, three of the commissioners are heading into an election, which seems unlikely to have no role in their thought processes. Pierce and Zapple are both running for reelection as commissioners; Scalise is running against New Hanover County school board member Dr. Tim Merrick for Republican Ted Davis, Jr.’s state representative seat.
From my point of view as an observer of local politics, a Republican approving a small tax increase is an easier sell on the campaign trail than a Democrat raising taxes instead of using the RSF.
It’s not that Zapple doesn’t have good reasons — he does — but, hypothetically, if he stays the course, you can imagine how an opponent might frame his stance, in the lowest-common-denominator lingo of campaign ads: The county is sitting on hundreds of millions of dollars, but Zapple wanted to raise YOUR taxes. Sure, that ignores the nuances of his argument — but that’s politics.
In another hypothetical, Scalise and Pierce would take some arrows in the back if they were to support even a small tax increase — but this isn’t a primary, it’s a general election, and they need moderates and unaffiliateds. In Scalise’s case, hardcore conservatives aren’t gonna vote for Merrick, but middle-of-the-road types might be amenable to Scalise's argument if he pitched a tax increase as a bipartisan compromise.
Again, that’s all hypothetical. My point here is not to guess what will happen — that’s anyone’s guess — but to show how much more complicated this is than the usual numbers game. Barring the nuclear option of budget cuts, commissioners will either raise taxes with a majority vote or agree to tap the RSF with a supermajority vote.
Either way, it’ll be an interesting compromise, and likely an unusual species of majority. It’s also a very New Hanover County type of irony that our tremendous wealth has actually made passing a budget more complicated.
It's a bit of a wait-and-see situation, but we won't have to wait too long. There’s just over two months for this to all play out, with a final scheduled budget work session on April 30, followed by public engagement, and a recommended budget presentation scheduled for May 4, with a public hearing slated for May 18. There are still two more meetings after that, on June 1 and 15, before the deadline to pass a budget, which is the end of the fiscal year on June 30.
Disclosure notice: Rob Zapple is a member of the WHQR Board of Directors, which has no say in editorial decisions or news coverage, and whose members we cover without fear or favor
