A federal penalty tied to North Carolina's food-assistance error rate could take between $30 million and $42 million a year out of Mecklenburg County's budget, beginning as soon as 2028. The county will owe a share of it even if its own error rate stays under the federal limit.
Budget Director Adrian Cox laid out the mechanism for the Board of County Commissioners on Wednesday night, working through the state budget signed on July 7. Commissioner Laura Meier, who represents District 5, asked him how a penalty that costs the county money saves the federal government any.
"This is a shift of federal costs to the local resident," Cox said. The federal benefits are paid for primarily with income taxes, he said, and the county's own revenue levers are "really limited to property tax."
County Manager Mike Bryant set that beside two other things arriving in the same stretch: the constitutional amendment on the November 3 ballot that would require the General Assembly to enact a limit on property tax increases, and the county's 2027 property revaluation. Voters decide the cap in November. Mecklenburg will not know what the penalty actually is until around February, and will not pay it until 2028.
"Mecklenburg County services alone cannot absorb this potential impact," Bryant told the board. If cuts came, he said, they would not stop at county programs. "I would have to look at our partners as well, which is inclusive of education, community college, our criminal justice partners also."
How a state's error rate becomes a county's bill
North Carolina is one of ten states where SNAP, the federal food-assistance program still widely called food stamps, is administered locally and supervised by the state. County staff take the applications and determine the benefits. The federal government pays for them. Jerrell told the county in his March State of the County address that when the federal government stopped sending SNAP benefits, Mecklenburg fed 140,000 residents.
H.R. 1, the federal budget reconciliation act signed into law in July of last year, changes who pays. Under it, a state whose SNAP payment error rate exceeds 6 percent has to start covering a share of the benefits itself: 5 percent at an error rate between 6 and 8 percent, 10 percent between 8 and 10, and 15 percent above 10. The first bill comes due in federal fiscal year 2028, calculated from the state's error rate in either federal fiscal 2025 or the year now underway. On last year's data, Cox said, a 5 percent match would cost North Carolina about $150 million.
North Carolina's answer, written into the budget Gov. Josh Stein, a Democrat, signed on July 7, 2026, is that the state does not pay it. The penalty is recovered by withholding revenue from the local two-cent sales tax, the portion of sales tax that stays inside a county and is split among the county government, Charlotte and the towns.
The same budget cuts the state personal income tax rate from 3.99 percent to 3.49 percent in 2027 and guarantees 2.99 percent by 2032, with a stated goal of 2.49 percent. Commissioner George Dunlap, who represents District 3, put the two halves together.
"Counties like Mecklenburg are going to be used to pay that same money that they're reducing the tax from," Dunlap said. "We're going to be supporting state government. Any way you look at it."
The budget pushes costs down in more than one direction. It also let the state bill local governments that withdrew support for a road project after work had begun. Charlotte's exit from the I-77 South toll lanes is the case in point: the city attorney put that claim at $64 million, and the city has until October 5 to reverse the vote or pay.
The formula, in two steps
The state's recovery formula runs in two parts, and only the second one has anything to do with how a county performs.
First, every county in North Carolina loses 0.75 percent of its sales tax, regardless of its own error rate. Cox called that a small portion, and said counties that were sampled and found to have no errors at all still pay it.
The remainder is then allocated by two factors: how much sales tax a county collects, and how much of the state's total error a given county accounts for. Because Mecklenburg collects a large share of the state's sales tax, the first of those factors can outweigh the second.
Commissioner Arthur Griffin, who serves at large, asked Cox to say plainly whether the county was on the hook for the state's error rate or its own.
"So the state could have an error rate of over 6 percent, and you as a county could have an error rate below 6 percent, and you would still pay a portion of the penalty," Cox said.
Chair Mark Jerrell, who represents District 4, pushed on the same point later, asking whether a county with a lower error rate than its neighbors could still owe a disproportionate share because the formula keys off sales tax volume. Cox confirmed that it could. "It's really the larger counties that really have to carry the burden for the entire state," Jerrell said. "You've got five or six counties that are going to have to carry the burden regardless."
What it might cost
The General Assembly's Fiscal Research Division ran an illustrative calculation using 2025 data and put it in the board's agenda material: $62 million countywide across the county government, Charlotte and the towns, with $41.5 million of that falling on Mecklenburg County's own budget. That is about 1.6 percent of the $2.6 billion the county is spending this year. Cox rebuilt the same calculation on the partial year of data available for the current federal fiscal year and got a somewhat better result, $44.6 million countywide and $30 million to the county.
Neither is the answer. The real figure will not be known until around February, after the federal fiscal year closes in October and the full-year error rate is published. Cox put the range of outcomes at zero, if the statewide rate falls below 6 percent, to roughly $120 million countywide if the state triggers the 15 percent tier. The scenario he called more likely is the 5 percent penalty, which annualizes to between $30 million and $42 million against the county budget.
The most recent partial report, covering five months of federal fiscal 2025, puts the statewide error rate at 6.5 percent. That is enough to trigger the 5 percent match. North Carolina has not been below 6 percent since 2019, outside 2020 and 2021 when pandemic waivers were in place. In 2022 and again in 2024, Cox said, the statewide rate would have triggered the 15 percent tier.
Charlotte and the towns are not spared. Under the Fiscal Research Division scenario, Cox told the board, the cities' and towns' share of the withholding would exceed 1 percent of their total general fund budgets. Bryant said the county sent the towns a summary last week and that he had spoken with City Manager Marcus Jones about it, and that the League of Municipalities is pressing for a delay alongside the county associations. "This is a bipartisan concern," Bryant said.
The error rate is not fraud, and it comes from under 1,000 files
Commissioner Elaine Powell, who represents District 1, said what she hears from Raleigh is that the penalties are about waste, fraud and abuse. "I don't think there's anyone here that wants to continue with any waste, fraud, and abuse," she said. "When we're hearing this presentation, it kind of feels like a funeral."
Cox corrected the premise directly, using his shorthand for the payment error rate. "The PER rate does not account for fraud rates," he said. "It is overpayments and underpayments. So that's not what we're talking about when we're talking about the payment error rate that is being used to determine what these penalties will be."
Meier restated it for anyone watching. "I just want to make clear the error rate for people who don't understand who are listening, that's human error. These are just human errors, correct?"
"That's correct," Cox said.
Some of those errors originate with applicants entering the wrong information and are caught later in quality control, Cox said.
The rate that sets the penalty is drawn from a sample of fewer than 1,000 cases statewide for 2025. Cox named that among his principal concerns: the state's formula for pushing the cost down to local governments rests on a small set of sampling data, and it disadvantages large counties that collect more sales tax.
The one lever, and the cap on it
The county has made changes on its own side of the ledger. The Economic Services Division has restructured so teams focus on a single function, holds weekly leadership meetings on process improvement, has increased quality sampling reviews and extended the mentoring period for new hires. The state Department of Health and Human Services has hired a vendor to recommend a business process redesign. The state budget puts about $3.1 million toward SNAP administration, including improvements to NCFAST, the state's benefits case management system, and seven quality-improvement training positions to support county social services departments.
None of that reaches the error rates of the other counties, and the penalty is statewide.
There is also a cost the county has already absorbed. The same state budget cut the reimbursement counties receive for administering SNAP from 50 percent to 25 percent. Cox said that was anticipated and is built into the current budget: $7.5 million this fiscal year, $10 million annually after that. That money is gone before any penalty is assessed.
That leaves revenue. Cox told the board that additional property tax revenue may be necessary in coming years to cover benefits the federal government used to pay for, and then named the problem with that plan. The option disappears, he said, if the state caps property tax rates or caps what the county is allowed to raise.
House Bill 1089 puts that question to voters on November 3, as a constitutional amendment requiring the General Assembly to enact a property tax levy limit. A levy limit caps revenue rather than the rate; the version discussed in Raleigh this spring would tie annual increases to population growth plus inflation plus debt service. Jerrell directed staff in April to explore litigation against the state over the property tax legislation. The county's 2027 revaluation lands in the same period.
Bryant walked the sequence for the board: the penalty, then the cap if voters approve it, then the revaluation, each one narrowing what the county can do about the one before it. He added a second problem, which is that the penalty is not a fixed number. It moves year to year with a statewide error rate the county does not control. "Cut one year, and then the next year the penalties may not be as harsh. So then you shot yourself in the foot."
The county is already carrying costs the state does not. Jerrell put the county's unfunded state mandates at $500 million. The largest single piece of that is Charlotte-Mecklenburg Schools: in May, Cox told the same board that the roughly $400 million Mecklenburg spends covering the state's share of CMS, mental health and the courts works out to about 16 cents of the property tax rate.
Meier put the end of that chain to residents directly. "When we have to pay this penalty to the federal government, it's going to affect them directly," she said. "The services that we provide right here, those are going to be cut. Would you say that's probably about true?"
"That is a potential outcome," Bryant said.
The board's read
Commissioner Susan Rodriguez-McDowell, who represents District 6, declined to analyze it. "I'm speechless," she said. "There's so much garbage in here that I just can't even speak to it. I'm outraged."
Griffin returned to the structure itself. Counties, he said, are being penalized "for administering the state programs if there happens to be things beyond our control even potentially. That is absolutely insane." He asked whether there was any discussion of changing the way North Carolina runs SNAP, given that most states do not administer it locally. Cox corrected one thing in the framing: SNAP is a federal program, and North Carolina has decided it will be locally administered with state oversight.
Vice Chair Leigh Altman, who serves at large, argued the underlying case rather than the legislature's motives. "We cannot fund services that just make for a decent society if taxes continue to shrink and shrink and shrink." She called on the North Carolina attorney general and attorneys general in other states to challenge the federal law, arguing that a liability of this size resting on a sample of fewer than 1,000 cases amounts to a due process violation.
Commissioner Yvette Townsend-Ingram, who serves at large, asked whether any body exists to develop alternative policies the county could trigger if the penalties take effect, rather than only advocating against them. Intergovernmental Affairs Manager Lisette Nimmons answered plainly: "In terms of a government entity, no." Later in the meeting, Townsend-Ingram said she would ask for an ad hoc committee to build one.
What happens next
The North Carolina Association of County Commissioners and its partners are asking Congress for a two-year delay on the cost-sharing penalties. Fourteen states are currently below the 6 percent threshold. North Carolina is not one of them. New SNAP requirements took effect in December, and their effect on error rates is not yet visible in the data.
The federal fiscal year closes in October. The number that sets the SNAP bill lands around February. The ballot question comes first, on November 3.