Union County staff warn HR1 changes and revaluation will complicate FY‑27 budget

Jason May, Union County’s director of budget and grants management, told the board at a special March 12 retreat that midyear fiscal 2026 revenues are “on pace to be at or exceed budget in the major revenue areas,” noting ad valorem collections have historically come in slightly above budget and four months of sales‑tax receipts are running about 2.1% over plan. He added the county’s personnel and operational expenses are on or slightly below budget and that the third phase of a multi‑year compensation study and midyear COLA and pay plan increases for the sheriff’s office have been completed.

But staff framed FY‑27 planning around two complicating factors: municipal responses to the county’s revaluation and federal changes in administrative cost sharing stemming from HR1. May said FY‑27 will be the first year the state’s revaluation is used to distribute sales tax among towns and counties; several Union County municipalities moved above their revenue‑neutral rates, which staff said will reduce the county’s share of organic sales‑tax growth.

County Manager Brian Matthews and budget staff described the HR1 administrative change as an “administrative cliff.” Under the new structure, federal administrative cost share for county work that supports food and nutrition services and Medicaid will drop from 50% to 25%, shifting a larger share of those administrative costs to counties unless the state steps in. May told the board the county is watching three linked risks: a reduced federal share, a statewide error‑rate penalty calculated at the state level that could produce a larger local penalty, and a shortened recertification interval that will raise casework volumes.

“Again, the federal administrative cost share is going to go from 50% to 25%,” May said. He warned that unless the state intervenes, “the county’s cost share is gonna go from 50% to 75%.” Matthews emphasized county staff will press both the state and the county association for relief and said the county is prepared to contact state legislators directly if needed. Matthews told commissioners his preliminary estimate of statewide median county impact was about $700,000 and that Union County’s exposure could be roughly $1.2 million, subject to final calculations.

Staff urged the board to consider budget contingency options and to direct managers to pursue legislative outreach. The board discussed options for presenting fiscal impacts to voters and the public as FY‑27 decisions approach. The meeting closed the budget discussion with a reminder that final state budget decisions and the timeline for legislative fixes remain uncertain; staff said they will return with updated impact calculations and options when more rules and data are available.