Macon County has issued a preemptive strike against a projected $700,000 state and federal budget shortfall by freezing its unallocated assets.

“In order to be in the best shape going into next year’s budget I am issuing an administrative order freezing expenditures from funds not yet released by contract, administrative process or board action,” County Manager Sam Greenwood wrote in a memorandum to commissioners. “By doing this now we assume an extra margin of fiscal security and flexibility for next year’s budget.”

The freeze order pertains to the 25 percent of the county’s general fund set aside according to a pre-established policy. Macon is one of few counties that sets aside such a high percentage for its unobligated funds, Greenwood said. The state Local Government Commission requires counties to set aside a minimum of 8 percent of its annual budget as a fund balance.

Of the county’s $50 million annual budget and $34 million general fund, approximately $8.5 million is unobligated. Next year’s budget amounts are expected to stay the same.

The county’s budget is based largely on an increasing tax base — basically the more homes and commercial properties that are built, the greater the budget. Increasing property values of existing property also increases the property tax revenues.

“We have good growth in our tax base right now,” Greenwood said.

Indeed, during the 1990s the county was the fastest growing in Western North Carolina. But this year’s growth would not overcome the projected state and federal budget cuts.

“Just in theory, that $700,000 would eat up the bulk of our growth in our tax base,” Greenwood said.

Greenwood said that he has no plans to ask commissioners to consider tax increases to make up for state and federal cuts. Rather, the county will be forced to make local spending cuts. County departments and agencies consequently will have to “absorb (the cuts) or do without.”

For now, the freeze should not affect general operating budgets, Greenwood said. Those funds have already been distributed. However, the county has close to $1 million in capital items or reserves that were earmarked for distribution through the end of the budget year in June.

“They’re just going to have to wait a little while,” Greenwood said.

While the $700,000 in state and federal cuts to the county budget are not guaranteed, the county must prepare for cuts to other local entities, such as the school system, Greenwood said. The county has learned “from experience that other agencies such as schools will look to the county to make up the losses, as will county departments,” Greenwood wrote.

A report issued by the General Assembly’s Fiscal Research Division in February and titled “State Budget Prospects: It’s Not Supposed To Be This Way!” blames budget shortfalls on slow economic recovery nationwide, with too few jobs, widespread use of one-time budget fixes and no relief from large health care cost increases. Recovery has not just been slow, but slower than in previous years of economic downturn, the report states.