Budget cuts loom due to sales tax shortfall

A major shortfall in Warren County sales tax revenue could end up forcing reluctant county commissioners into a property tax increase after a record five years with no rise in the $2.31 tax rate.
According to director of accounts Linda Hillis, it looks as if the county sales tax revenue will be short by a substantial amount, although the final figures won’t be available until June 30.
‘Right now it looks like it will be $300,000 to $400,000 shorter than last year,’ Hillis said.
Splitting the difference on the estimated sales tax shortfall would require commissioners to come up with $350,000 in budget cuts, or an extra $350,000 in property tax revenue. At $49,820 per penny, it would take a property tax increase of around 7 cents to make up the shortfall.
‘I just don’t think we have the votes for a tax increase,’ said Budget and Finance Committee chairman Herschel Wells.
This puts commissioners in a difficult situation, since one of the largest county budgets is the school system, which can’t be legally reduced due to maintenance of effort statutes that require county governments to fund schools at the levels established the previous year.
As Director of Schools Dr. Jerry Hale pointed out during an Education Committee meeting earlier this month, the school system budget comes from a combination of federal, state and local funding, with the local funding coming from a combination of local option sales tax revenue and property taxes.
Though a small percentage of local option sales tax goes to debt service, the majority goes to schools.
‘There are two major categories there,’ Hale said. ‘So if one drops, the other has to increase to get the same figure.’
In 2006-07 sales tax collections designated for the school system came to $7,758,423. Hillis estimates year’s totals will show a considerable decrease.
‘The tentative estimate I have right now is around $7.4 million,’ said Hillis, noting this could change up or down by the end of the month.
Currently the budgets for all county departments have been submitted and approved by the various responsible committees and passed on to the Budget and Finance Committee. Since the county budget, including the school system, is funded by a combination of property taxes and local option sales tax revenue, there would have to be a substantial increase in property tax revenue to cover the decrease in sales tax collections.
But this hasn’t been the case. Last year a penny of property tax brought in around $1,700 more than the previous year, which, along with some other factors, brought in around $400,000 in increased revenues, allowing commissioners to pass a budget with no increase for the fifth year running.
Although there has been an increase this year, from $49,873 to $49,820, it comes to only $37 on the penny, which Hillis says will amount to only $8,500 or so extra in property tax revenues.
‘That’s not a lot,’ Hillis said. ‘But it is a little bit of an increase. At least it didn’t decrease.’
As a result, the Budget and Finance Committee will either have to make some major cuts in county departmental budgets or institute the first property tax increase in six years, something they say they will work diligently to avoid.
Budget and Finance held its first meeting Thursday night after receiving the completed budgets, and has already begun to make cuts in areas commissioners feel will not affect services.
The first department involved was Sanitation, with $34,000 in cuts, some of which could be covered with capital outlay notes. Cuts to the Ambulance Service fund were also discussed, but delayed until Budget and Finance could meet with director Brian Jennings at its next meeting tomorrow at 5 p.m.
With nine separate funds, including the general fund which has around 50 accounts and encompasses the Sheriff’s Department, Budget and Finance Committee members will have a lot of places to look for cuts.
‘We’re going to have to go through all of these budgets and see what we can do,’ Wells said. ‘We’re definitely going to have to make some cuts.’
Committee member Terry Bell said he would support cuts as long as they are across the board between departments.
‘I don’t think it’s fair to cut one without cutting the others,’ Bell said.