or Truth
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regional
brief
Does Nash Need aSales-Tax Increase?
County already has $18 millionin available funds
D
r
. M
ichael
S
anera
, J
oSeph
c
oletti
, t
erry
S
toopS
A
pril
2008
No. 47
e
xecutive
S
uMMary
The Nash County commissioners are asking county residents toapprove a sale-tax increase on May 6. If approved, commissionersintend to direct most of the new revenue to capital improvementsfor the county’s schools and the community college.Commissioners’ intentions are not legally binding. Once passed, allnew revenues, by law, may be used for any legal purpose.
Nash County schools are not underfunded. Over the last ve years
(academic years 2002-03 to 2006-07), student population has not
increased, while local spending, adjusted for ination, has increased
by six percent, state spending is up eight percent, and federal spend-ing is up 21 percent (see Figure 2).If the school district has facility needs, the county commission andschool board need to show taxpayers how they would spend thenearly $34.5 million in state money provided for capital improve-ments over the next ten years (see Figure 1).This
Regional Brief
nds that Nash County’s problems are not cre
-ated by a lack of funding. The $18 million in savings and revenues
identied in this report total more than six times the amount that
•••••
The authors thank John Locke Foundation research intern Clint Atkins for his assistance with this report.
does nash county need a sales-tax increase?regional brief
Figure 1. Nash County Projected Revenue and Savings
the proposed sales-tax increase is estimatedto produce (see Figure 1). If the countyused this money instead, it could delay asales-tax increase for six years.County revenues have grown nine percent
faster than population and ination since
Fiscal Year (FY) 2001. The total amount of revenue for FY 2006 was over $4.7 millionmore than in FY 2001. By FY 2006, theaverage family of four was paying $208more in taxes than in FY 2001.
1
Nash County’s cash reserves are almost16.5 percent of its annual budget. Thestate requires all counties to have eightpercent of their budgets held in cash foremergencies, but Nash County has nearly8.5 percent more than that minimum. Thismeans that the county has more than $7.2million in cash that it can spend on press-ing needs. This represents more than 2.5times the amount that the proposed salestax would raise. In other words, the countycould use this available cash for the next2.5 years instead of new sales-tax revenue,which is estimated to be worth only about$2.9 million per year.From FY 2004 to FY 2006, Nash Countygave $3.9 million in incentives to a few
•••
selected private businesses.
2
This practice isunfair to the hundreds of businesses in thecounty who are, at times, forced to competewith tax-subsidized businesses.
Nash County beneted from the Medic
-aid swap more than many North Carolinacounties. While 23 counties are receiving only the state’s promised “hold harmless”amount of $500,000 a year for ten years,Nash County receives about $1.7 million
the rst full year and a total of almost
$19.5 million over ten years (see Figure 1).
B
ackgrounD
In its 2007 session, the North Carolina Gen-eral Assembly relieved all counties of paying the portion of Medicaid expenses that hadbeen forced on counties, in exchange for thehalf-cent sales tax that the counties leviedto help pay those expenses.
3
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-transfertax rate from 0.2 to 0.6 percent, or not hik-ing taxes at all. The legislature also requiredcounties to put those tax increases to an advi-sory vote of the people. If voters approved,
•
Revenue Gains1 year10 years
Gain from Medicaid swap (FY 2008-09)$1,024,488$6,283,419Estimated school capital (Avg based on projections)$1,568,533$15,987,428
Potential Savings
Eliminate economic incentive giveaways (2004-2006 Avg)$976,929$9,769,290
Revenue Growth
Revenue in excess of population and inflation (FY2006)$17,568,563$175,685,626
TOTAL$21,138,513$207,725,763Fund balance in excess of state requirement (FY 2007)$5,209,996$5,209,996
Potential extra availability$26,348,509 $212,935,759Revenue from Sales Tax Increase$1,522,716 $20,635,590
John locke foundationdoes nash county need a sales-tax increase?
county commissioners were allowed butnot required to increase taxes. If both taxincreases were on the same ballot and bothwere approved, commissioners could imposeonly one tax increase, not both.In November 2007, there were 27 coun-ties that put sales-tax or land-transfer taxincreases on the ballots for voter approval,
and ve of those counties put both tax
increases on the ballots. Alexander Countypassed a sales-tax increase in January 2008. All told, there have already been 33 separate votes (16 over land-transfer tax increases and17 over sales-tax increases). Voters defeated27 of the 33 requests for tax increases. Vot-ers rejected all 16 of the land-transfer taxincreases and 11 of the sales-tax increases.In the May 6 election, 24 counties haveput tax increases on the ballot, 20 propos-ing sales-tax increases and four proposing land-transfer tax increases. Six of the coun-ties that saw tax increases voted down inNovember are asking voters to vote again fora tax increase in May (Cumberland, Gates,Greene, Henderson, Hertford, and Moore).There is no limit to the number of times thatcounty commissioners can place a proposedtax increase on the ballot, or how much taxmoney commissions can spend on public“education” campaigns requesting that votersapprove the tax increase.
p
uBlic
S
chool
S
penDing
4
By far, counties spend more money on publiceducation than on any other area. Total localgovernment spending in North Carolinaon public education was $2.68 billion — or$1,934 per pupil — for the 2006-07 school year. Nearly 25 percent of all expenditureson public schools come from local tax rev-enue. Given the amount of taxpayer moneyinvolved, sympathetic appeals for schoolfunding should not come at the expense of
sound scal policy.
County governments and school boardsshould hold expenditures of local tax dol-lars for education and additions to publicschool personnel in proportion to changesin their school populations. In Nash County,local spending for education outpaced schoolpopulation growth. From academic years2002-03 to 2006-07, student population waseffectively unchanged. At the same time,there was a six percent decrease in personneland a four percent increase in local spending (see Figure 2).
Figure 2. Nash County Student Population, Personnel, andSpending, 2002-07
ADM: 0%Total Personnel: –6%Local PPE: +4%State PPE: +8%ExceptionalChildren: –25%FederalPPE: +21%
-30%-20%-10%0%10%20%30%
Notes: ADM stands for Average Daily Membership of students. PPE stands for Per-Pupil
Expenditures. All PPE gures have been adjusted for ination.
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Does Nash need a sales tax increase?
The Nash County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $18 million in revenue and savings the county could use to meet its needs — six times the amount that the proposed tax increase would produce.
Authors: Dr. Michael Sanera, Terry Stoops, and Joseph Coletti
Authors: Dr. Michael Sanera, Terry Stoops, and Joseph Coletti
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