Public Signals

Little considered or included in public discussions of property tax caps, or limitations on governmental expenditures are intergovernmental financial relationships. This is not merely a matter of mandates but recognition that very large sums of money flow back and forth between all levels of government. What is expenditure for one level of government is often revenue for another.

For example, in 2009, about 27 percent of county revenue in New York was in the form of State and Federal aid. This excludes operational revenue, such as Medicaid reimbursement for county-provided health services. But while the average was about 27 percent, from county-to-county, State and Federal aid ranged from 13.7 in Lewis County to 39.0 percent in Allegany County. Though they are in different parts of New York, both are relatively rural, thinly populated counties. Yet, they represent the opposite extremes in the use of Federal and State aid as a share of all their revenues outside of property taxes.

At a more detailed level, in 2009, State Aid averaged about 14 percent of county revenues, ranging from a low of 7.2 percent in Lewis County (and 8.5 percent in large, densely populated Nassau County) to a high of 19.5 percent in Yates County. At the same time, Federal Aid averaged about 12 percent and ranged from 6.5 percent again in Lewis County to 25.0 percent in Allegany County. The differences may reflect a wide variety of factors that influence respective shares, but since different services have different reimbursement rules and different expenditure levels, this may include different service mixes. Even when the services are “mandated,” the exact levels and manner of delivery are not. The rules are certainly not mechanical. Even for mandated services, discretion may be subtle at the local level, but it does exist.

Similarly some local levels of government share some of their revenue with even smaller jurisdictions e.g. counties share sales-tax revenue with cities, towns, and villages. In New York State, about one-quarter of local sales tax revenues (excluding the State’s share, which is a uniform four percent statewide) is distributed by counties to cities, towns, and villages. In 2009, about ten percent of counties shared none of their sales tax revenues. At the same time, about 10 percent shared 49 percent or more, up to a maximum of 61.7 percent.

Since there is much variation in sales tax receipts per capita, merely looking at what percentage of a revenue source is shared with other levels of government is insufficient and perhaps misleading. The graphic here shows sales-tax distribution per capita that goes from counties to cities, towns, and villages matched up against the amount per capita that is retained by counties for their own purposes.

Counties in the upper left, share little or none of their sales tax revenue and they receive and retain high amounts for each county resident. In the lower left, counties share little, but because their revenue is low, they still don’t have much for their own purposes. In the lower right are counties which share high proportions and they are left with relatively low amounts for themselves.

In the upper right are two counties, Albany and Warren. Relatively few counties may share a higher percentage of their sales tax revenue with local governments, but at the same time, relatively few (eight) counties retain as much for their own purposes as Warren and Albany. On the average, counties received $479 in sales tax revenues for each resident. In contrast, Albany received $755 per resident and Warren $776. Both share relatively high amounts but they still retain relatively high amounts for their own purposes because their sales tax revenues start from a high base. There were only three other counties whose sales tax revenues per capita were in excess of $700.

The average county retained $349 per resident for its own purposes. The lowest was $176 (Madison County) and the highest was $751 (Suffolk County). Albany retained $458 per resident and Warren retained $464.

Clearly, attempts to keep taxes or tax increases low at one level of government may trigger tax increases at another level (though at least that has the political advantage of requiring a different set of elected officials to cut services, increase taxes, or drain reserves. But the relationships are neither mechanical nor standardized. Without careful analysis, expect surprises. And remember what rolls downhill.

Later, we’ll turn the prism and examine what the numbers look like on the receiving end – at the city, town and village level.

Tagged as: Budget, City, County, Intergovernmental Finance, Lewis County, Mandates, Sales Tax, Town, Village

{ Comments on this entry are closed }