State leaders pass SNAP costs to counties while limiting their ability to pay
The harmful One Big Beautiful Bill, or H.R. 1, made deep funding cuts to SNAP and shifted more of the program’s costs onto states. Instead of stepping up to cover North Carolina’s new costs, state leaders chose to shift them onto local governments in the approved Fiscal Year 2027 state budget.
Beginning in October 2027, counties could collectively face more than $220 million in new SNAP costs each year, including an estimated $150 million in benefit costs.
State leaders are not simply passing new costs to counties. To pay those state benefit costs, the state will withhold local sales tax revenue from counties and municipalities, leaving communities with less to fund public schools, public safety, and other local needs.
The state will take local sales tax dollars to pay its SNAP bill
H.R. 1 ties the state’s future responsibility for SNAP benefit costs to their payment error rate — the share of SNAP dollars issued incorrectly, often due to unintentional administrative mistakes.
Under North Carolina’s flawed plan, every county will be required to help cover state benefit costs through local sales tax revenue, the second largest source of county revenue statewide:
- Every county will lose a fixed share of its sales tax allocation, at minimum, regardless of its number of SNAP participants or how many SNAP payment errors are attributed to it.
- Some counties will lose even more local sales tax dollars, based on the size of their sales tax revenue and the payment errors attributed to them.
- Municipal budgets will lose revenue too. Since counties distribute portions of their local sales tax revenue to municipalities, this state cost shift will squeeze both county and municipal budgets statewide.
The state cost shift will worsen existing local budget pressures
Whether the state takes thousands of dollars from small rural counties or millions from large urban counties, the state plan will leave every local government with fewer resources to meet their communities’ needs.
For smaller and rural counties with limited resources, even a relatively small sales tax loss can strain their budgets. Dare County, for example, has less than 1 percent of the state’s SNAP participants and had no SNAP payment errors attributed to it in FY 2025. Yet, the state could take nearly $350,000 of Dare’s local sales tax revenue in the first full year of the cost shift.
That revenue loss comes as counties already face $52 million in new SNAP administrative costs in FY 2027. At the same time, avoiding future benefit costs will require counties to invest even more resources into improving payment accuracy.
Counties with slowing or declining local sales tax revenue will particularly be harmed by the cost shift. For instance, Randolph County collected about 5 percent less sales tax revenue than it did the previous year. County Manager Zeb Hoden acknowledged that the county has “not been able to fund everything [they] would like to fund” because recurring dollars “are just not there.”
Other counties, including Sampson and Guilford, are already asking voters to approve a sales tax revenue rate increase this November to keep up with existing responsibilities. Now the state plans to take from the same revenue source that local governments are already struggling to make do with.
Larger urban counties will face the cost shift at a greater scale. With larger populations and SNAP caseloads, these counties process more cases and are thus at risk of making more unintentional administrative errors.
For example, Mecklenburg County accounted for 16.5 percent of attributed payment errors statewide in FY 2025. Under the cost shift, the county could lose more than $61 million in local sales tax revenue annually — almost 10 percent of its sales tax revenue and the largest loss of any county.
State leaders are creating a local revenue crisis
The SNAP cost shift is part of a years-long trend of the state reducing its revenue capacity to meet essential needs while pushing more costs onto local governments. Now, state leaders are doubling down with policies that would squeeze three major revenue sources that the state and local governments rely on:
- Drain local sales tax revenue: The state will withhold local sales tax dollars to pay for SNAP benefit costs that are the state’s responsibility.
- Restrict local property tax revenue: The proposed property tax levy limit would give lawmakers the power to restrict the growth in local governments’ largest revenue source — just as counties are being asked to absorb more state costs.
- Lock in state income tax cuts: The proposed income tax cap would prevent the state from raising income tax rates above 3.5 percent. With personal and corporate income tax rates already scheduled to fall below this level, the amendment would restrict future lawmakers’ ability to raise the revenue needed to meet state responsibilities and support local services.
Everyday North Carolinians will pay the price
Costs do not disappear when the state refuses to pay them. The bill is kicked down to counties, cities, and towns — and ultimately, everyday North Carolinians will pay the price through higher local taxes and fees, cuts to local services, and more out-of-pocket costs when revenue falls short.
The proposed amendments may be sold as tax relief, but they would lock North Carolina into the same cycle:
- Less state revenue
- More costs onto local governments
- Fewer resources to meet community needs.
The result is a future where local governments are expected to do more and more with less while everyday North Carolinians are left to make up the difference.
