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or Truth 
The John Locke Foundation
is a501(c)(3) nonprot, nonpartisan researchinstitute dedicated to improving public policy debate in North Carolina. Viewpoints expressed by authors do not necessarilyrefect those o the sta or board o the Locke Foundation.
200 W. Morgan, #200Raleigh, NC 27601
phone:
919-828-3876
fax:
919-821-5117www.johnlocke.org
regional
brief 
Does Guilford Need aSales-Tax Increase?
County already has almost $65.3 million in available funds
D
r
. M
ichael
S
 anera 
, J
oSeph
c
oletti
, t
erry
S
toopS
O
ctOber
2008
No. 61
e
xecutive
S
uMMary
The Guilford County commissioners are asking county residentsto approve a sale-tax increase on November 4. If approved, countycommissioners indicate they would use the new funding for schoolconstruction.
Statements by county ofcials regarding the possible use of new
sales-tax revenue are not legally binding. Once passed, all new rev-enue, by law, may be used for any legal purpose.This
 Regional Brief 
nds that Guilford County’s problems are not
created by a lack of funding. The almost $65.3 million in savings
and revenues identied in this report is more than four times the
amount that the proposed sales-tax increase is estimated to produce(see Figure 1). If the county used this money instead, it could delaya sales-tax increase for over four years.County revenues have grown 10 percent faster than population
and ination since Fiscal Year (FY) 2002 (see Figure 2). The totalamount of revenue for FY 2007 was over $36.8 million more thanin FY 2002. By FY 2007, the average family of four paid $328more in taxes than in FY 2002. It would take a 25 percent increase
in family income (current dollars) to match the increase in revenues
••••
The authors thank John Locke Foundation research intern Clint Atkins for his assistance with this report.
 
does guilford county need a sales-tax increase?regional brief
Figure 1. Guilford County Projected Revenue and Savings
that the county has received over those ve
 years.If Guilford County were to restrict itsrevenue increases to the increases in popu-
lation and ination, the county’s revenues
would increase 43 percent over the next ten years.Over the next ten years, the number of public-school students in Guilford County
will increase by 7,977 or by about 11.2
percent (about 1.1 percent per year).If the school district has facility needs, thecounty commission and school board needto show taxpayers how they would spendthe over $136.4 million in state moneyprovided for capital improvements over thenext ten years.
Guilford County beneted from the Med
-
icaid swap above the state’s promised “hold
harmless” amount of $500,000 a year forten years. Guilford County receives over
$1 million the rst full year and a total of more than $65.2 million over ten years (see
Figure 1).
From FY 2004 to FY 2006, GuilfordCounty gave nearly $2.1 million in incen
-tives to a few selected private businesses.
•••••
This practice is unfair to the hundreds of businesses in the county who are, at times,forced to compete with tax-subsidized busi-nesses.
B
 ackgrounD
In its 2007 session, the North Carolina Gen
-eral Assembly relieved all counties of paying 
the portion of Medicaid expenses that had
been forced on counties, in exchange for thehalf-cent sales tax that the counties leviedto help pay those expenses.
1
In addition, thelegislature voted to give counties the optionto ask voters to approve new tax increases.Options include increasing the sales tax byone-quarter cent, tripling the land-transfer
tax rate from 0.2 to 0.6 percent, or not hiking 
taxes at all.The legislature also required counties toput those tax increases to an advisory vote of the people. If voters approved, county com-missioners were allowed but not requiredto increase taxes. If both tax increases wereon the same ballot and both were approved,commissioners could impose only one taxincrease, not both.
Since November 2007, county votersacross North Carolina have voted 58 times
Revenue Gains1 year10 years
Gain from Medicaid swap (FY 2008-09)$5,128,990$65,234,371Estimated school capital (Avg based on projections)
$12,271,725$136,424,767
Potential Savings
Eliminate economic incentive giveaways (2004-2006 Avg)
$2,101,327$21,013,267
Revenue Growth
Revenue in excess of population and inflation (FY 2007)$36,821,930$368,219,297
TOTAL$56,323,972$590,891,702Fund balance in excess of state requirement (FY 2007)$8,937,557$89,375,570
Potential extra availability$65,261,529 $680,267,272Revenue from Sales Tax Increase$16,018,679 $215,351,508
 
 
John locke foundationdoes guilford county need a sales-tax increase?
on such tax increases, rejecting nearly all of them. Voters have approved only eight of 
those 58 proposed tax increases. Undeterred
by voter opposition, some county commis-sions have put the tax increases on the ballotmore than once.There is no limit to the number of timesthat county commissioners can place aproposed tax increase on the ballot, or howmuch tax money commissions can spend on
public “education” campaigns requesting 
that voters approve the tax increase.
p
uBlic
S
chool
S
penDing
2
By far, counties spend more money on public
education than any other area. Total localgovernment spending on public education
was $2.68 billion or $1,934 per pupil for the2006-07 school year. Nearly 25 percent of all
expenditures on public schools come fromlocal tax revenue. Given the amount of tax-payer money involved, sympathetic appealsfor school funding should not come at the
expense of sound scal policy
County governments and school boardsshould spend local tax dollars for education,as well as hire public school personnel, inproportion to changes in their school popula-
tion. In Guilford County, from 2002 to 2007,
there was a nine percent increase in studentpopulation. At the same time, there was a
seven percent increase in local, ination-
adjusted per-pupil expenditures.
Over the last ve years, the state in
-creased per-pupil expenditures in Guil-ford County by three percent, adjusted for
ination. Federal per-pupil expenditures
increased by nine percent during the sameperiod.The North Carolina Department of Pub-lic Instruction (DPI) projects that Guilford
County Schools will add 7,977 students overthe next ten years, an 11.2 percent increase.The state’s Public School Building Capi
-tal Fund, which includes lottery funds, willprovide Guilford County with an estimated$136.4 million over the next ten years.In order to stretch those dollars to handlethe expected growth, the school systemshould redirect funds away from low prior-ity projects, reduce the size of the schoolbureaucracy, pursue ways to reduce construc-tion costs, redirect existing revenue streams,and implement sound facilities alternatives.
 With proper planning and “out of the box”
thinking, the school district can manageenrollment growth using proven, cost-effec-tive construction, renovation, and mainte-nance solutions that are taxpayer-friendlyand enhance educational opportunities forstudents.Even though voters approved the schoolconstruction bonds earlier this year, it is nottoo late to implement cost-saving strategies.They would allow the county successfully tomeet the challenges of growth for years tocome without incurring excessive public debtor further straining weary taxpayers.The voters of Guilford County passedthe school construction bonds with theunderstanding that funds to pay for the debtservice would be in place. In other words,they expected that county commissionerswould raise property taxes to pay for thebond debt service. Thus, it makes little senseto now propose using sales-tax revenue topay for the bond debt service. Had votersfound higher property taxes unpalatable, theywould not have voted to approve the school
construction bonds in the rst place. More
-over, had voters wanted to use the sales tax topay for bond debt, they would have approved
the sales-tax referendum in May. Put simply,
the voters have already decided that propertytaxes are the best way to pay for school bonddebt.Perhaps the most worrisome aspect of theproposed sales tax is that there is nothing tobind future county commissions from divert-ing sales tax funds to pay for pet projects like
light rail or greenways. A May 2008 editorial
published by the
 News & Record 
assured read-ers that the county commission would uphold
their “moral and political obligation” to use
sales tax revenue to pay bond debt. That ishardly reassuring.
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