The county's plan to let the state pay its Medicaid costs in exchange for some of its sales tax revenue - known as an "intercept" plan - may have hit a major roadblock.

County Democrats said today that a recent memorandum from a state official confirms the position they've held all along: that the county can't take sales tax revenue away from the city, towns, and suburban school districts.

In an April 30 memorandum to County Executive Maggie Brooks, the acting commissioner of the state's Taxation and Finance Department, Barbara Billet, laid out the state's guidelines for enacting a sales-tax intercept plan. Democrats highlighted a portion of the document that says if such a plan is put in place, the county would still have to provide the municipalities with their share of the sales tax. If there is not enough sales-tax money left over after Medicaid expenses are paid, the county would have to meet the obligation through other funding options, the document said.

The Morin-Ryan agreement, which is up for renewal at the end of the year, constitutes such an obligation, the Democrats argue. That plan provides a formula for the county to distribute sales tax revenue to the City of Rochester as well as to the towns, villages, and school districts of Monroe County.

But the county administration disagrees with the state document. The state law establishing the intercept allows counties to explore revenue sharing, but does not require it, county attorney Daniel DeLaus said in an e-mailed statement.

Billet's "interpretation changes the clear language of the statute - something only the State Legislature may do," DeLaus said.

With the Morin-Ryan pact up for renewal, a messy fight could be in the making. Also coming into play is the extra cent of the sales tax that the state approved in 1993. (Monroe County receives four of the eight cents per dollar charged in sales tax. The state gets the rest). The county's fourth cent is also coming up for renewal.

State Assemblyman Joe Morelle, a Democrat, has said that the State Legislature might not renew that extra cent if Brooks doesn't take the intercept proposal off the table.

According to Billet's memorandum, any county wishing to enact an intercept plan must approve it and notify state officials by September 30.