RALEIGH – Lenoir County commissioners could free $18.6 million for high-priority county government functions, without raising tax rates. That’s the message in a new John Locke Foundation Regional Brief.
The $18.6 million figure includes new money expected from the state, along with savings gained from the elimination of non-essential county spending, said Dr. Michael Sanera, JLF Research Director and Local Government Analyst. Taxpayers can read the brief before they consider allowing the county government to raise the local sales tax.
“Lenoir County commissioners are asking voters to approve a quarter-cent increase in the local sales tax November 6,” Sanera said. “The increase would increase county revenues by $1.3 million in the first full budget year. But our analysis shows Lenoir County government doesn’t need to take the additional money away from taxpayers.”
“If Lenoir County tax revenues increase only as fast as the combined rate of population and inflation growth during the next 10 years, total revenues will increase 22.8 percent,” he added. “This increase is more than adequate to pay for county needs, including new school construction.”
This year the General Assembly gave every county a chance to raise either the local sales tax or the real estate transfer tax. The new tax options were part of a deal involving the state relieving counties of local Medicaid expenses. The deal also called on counties to forfeit a half-cent of local sales tax.
Counties cannot raise the taxes without a local referendum. Lenoir and about one-third of the rest of North Carolina’s counties are asking taxpayers for the right to raise their taxes, Sanera said. A JLF research team is analyzing the potential impact in each county. Working with Sanera are Joseph Coletti, JLF Fiscal Policy Analyst; Terry Stoops, JLF Education Policy Analyst; and Justin Coates, JLF Research Intern.
“Even though Lenoir and other counties were forced to give up some revenue as part of the Medicaid deal, they benefit from another part of the deal called the ‘hold harmless’ provision,” Sanera said. “It guarantees that Lenoir County will have at least $500,000 in additional funds that can be used to meet other county needs. In Lenoir’s case, the actual figure is more than $520,000.”
Lenoir County government already has cash reserves of more than $6.8 million, Sanera said. “That’s 12.4 percent of the county’s annual budget, far more than the 8 percent cash reserve the state requires,” he said. “The county could meet the state requirement and still have $2.4 million to help with existing government needs or to provide much-needed tax cuts.”
Lenoir’s budget numbers also show the county has no problem coping with growth, Sanera said. “Between 2001 and 2006, county per capita revenues increased by 4.7 percent after adjusting for inflation,” he said. “Population growth has been paying for itself because real county revenues are growing at a faster rate than population. New county residents are contributing more than their fair share of county revenues.”
If county government had confined its budget increases to the rate of inflation plus population growth since 2001, the county would have collected $9 million less revenue in 2006 than it actually collected, Sanera said. “This amount could — and should — be returned to the taxpayers in the form of tax cuts.”
The report also draws attention to county government’s questionable spending practices, Sanera said. “Lenoir County has given $7 million in economic incentives to businesses and corporations from 2004 to 2006,” he said. “Taxpayers should consider this corporate welfare before they decide whether the county needs a new source of money.
“A sales-tax increase at this time would only encourage more wasteful and inefficient spending,” he added. “County voters need to demand that the county live within the taxpayers’ means. This Regional Brief has outlined ways for Lenoir County to find plenty of money to meet its needs.”
The John Locke Foundation’s Regional Brief, “Lenoir County Doesn’t Need a Sales Tax Increase,” is available at the JLF web site. For more information, please contact Sanera at (919) 828-3876 or [email protected]. To arrange an interview, contact Mitch Kokai at (919) 306-8736 or [email protected].