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Does Randolph need a sales tax increase?

Does Randolph need a sales tax increase?

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The Randolph County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $33.5 million in revenue and savings the county could use to meet its needs — more than 13 times the amount that the proposed tax increase would produce.

Authors: Dr. Michael Sanera, Terry Stoops, and Joseph Coletti
The Randolph County commissioners are asking voters to approve a sales-tax increase on May 6. This report identifies $33.5 million in revenue and savings the county could use to meet its needs — more than 13 times the amount that the proposed tax increase would produce.

Authors: Dr. Michael Sanera, Terry Stoops, and Joseph Coletti

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Published by: John Locke Foundation on Dec 12, 2009
Copyright:Attribution Non-commercial

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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 Randolph Need aSales-Tax Increase?
County already has $33.5 millionin available funds
D
r
. M
ichael
S
 anera 
, J
oSeph
c
oletti
, t
erry
S
toopS
 A 
pril
2008
No. 41
e
xecutive
S
uMMary
The Randolph County commissioners are asking county residentsto approve a sale-tax increase on May 6. Commissioners say thatmore funding is needed for capital improvements including schools,a countywide water system and a jail.Commissioners’ statements about how they will use the new rev-enue are not legally binding. Once passed, all new revenues, by law,may be used for any legal purpose.This
 Regional Brief 
nds that Randolph County’s problems are not
created by a lack of funding. The $33.5 million in savings and rev-
enues identied in this report total more than 13 times the amount
that the proposed sales-tax increase is estimated to produce (seeFigure 1). If the county used this money instead, it could delay asales-tax increase for 13 years.
Randolph County schools are not underfunded. Over the last ve years, student population has increased by only ve percent, while
school personnel have increased by 12 percent and local spend-
ing, adjusted for ination, has increased by 21 percent. In addition,state spending adjusted for ination is up eight percent and federal
spending is up 28 percent (see Figure 2).
The authors thank John Locke Foundation research intern Clint Atkins for his assistance with this report.
 
does randolph county need a sales-tax increase?regional brief
Figure 1. Randolph County Projected Revenue and Savings
If the school district has facility needs, thecounty commission and school board needto show taxpayers how they would spendthe $27 million in state money providedfor capital improvements over the next ten years.County revenues have grown 11 percent
faster than population and ination since
Fiscal Year (FY) 2001 (see Figure 3). Thetotal amount of revenue for FY 2006 wasmore than $8.3 million more than in FY2001. By FY 2006, the average family of four was paying $244 more in taxes thanin FY 2001. It would take a 26 percentincrease in family income (current dollars)to match the increase in revenues that the
county has received over the last ve years.
1
In fact, if Randolph County were to adjustits revenue stream for only population and
ination increases, the county’s revenues
would increase 41.3 percent over the nextten years.
2
Randolph County’s cash reserves are 27.8percent of its annual budget. The staterequires all counties to have eight percentof their budgets held in cash for emergen-cies, but Randolph County has 19.8 per-
cent more than that minimum. This meansthat the county has almost $20 million incash that it can spend on pressing needs(see Figure 1). This represents more thaneight times the amount that the proposedsales tax would raise. In other words, thecounty could use this available cash for thenext eight years instead of new sales-taxrevenue, which is estimated to be worthonly $2.5 million per year. Based on thisitem alone, the county does not need toincrease the sales tax.
Randolph County beneted from the
Medicaid swap more than many NorthCarolina counties. While 23 counties arereceiving only the state’s promised “holdharmless” amount of $500,000 a yearfor ten years, Randolph County receives
almost $2 million the rst full year and a
total of almost $7.1 million over ten years(see Figure 1).From FY 2004 to FY 2006, RandolphCounty gave almost $2 million in incentivesto a few selected private businesses.
3
Thispractice is unfair to hundreds of businessesin the county who are, at times, forced tocompete with tax-subsidized businesses.
Revenue Gains1 year10 years
Gain from Medicaid swap (FY 2008-09)$1,976,366$7,094,565Estimated school capital (Avg based on projections)$2,649,935$27,051,994
Potential Savings
Eliminate economic incentive giveaways (2004-2006 Avg)$643,166$6,431,660
Revenue Growth
Revenue in excess of population and inflation (FY2006)$8,305,068$83,050,681
 TOTAL$13,574,535$123,628,900Fund balance in excess of state requirement (FY 2007)$19,955,548$19,955,548
Potential extra availability$33,530,083 $143,584,448Revenue from Sales Tax Increase$2,495,882 $33,536,308
 
 
John locke foundationdoes randolph county need a sales-tax increase?
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.
4
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,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 a tax increase.
p
uBlic
S
chool
S
penDing
5
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
Figure 2. Randolph County Student Population, Personnel,and Spending, 2002-07
Notes: ADM stands for Average Daily Membership of students. PPE stands for
Per-Pupil Expenditures. All PPE gures have been adjusted for ination.
ADM: +5%Total Personnel:+12%State PPE: +8%Local PPE: +21%ExceptionalChildren: –14%FederalPPE:+28%
-20%-15%-10%-5%0%5%10%15%20%25%30%

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