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INTRODUCTION


County governments directly affect the economic vitality and quality of life in their communities. This role encompasses a range of services, from maintaining 45 percent of America’s roads to supporting nearly 1,000 hospitals to keeping communities safe through law enforcement. These services require massive resources including more than $106 billion annually in building infrastructure and maintaining and operating public works, more than $53 billion annually in construction of public facilities and nearly $70 billion annually for community health and hospitals.1


The increasing extent of state limitations on counties’ capacity to raise revenue is making provision of these services more difficult. State limitations include restricting the types of taxes counties may impose, limitations on the rates of permitted taxes, the total revenue collected and property assessments, along with an obstacle-strewn approval process.


Concurrent with these constraints, state and federal governments require counties to provide a growing scope of services. These mandates are often unfunded either entirely or partially. Revenue sharing by states and other state and federal funding for county services alleviate some of these mandate related costs. But in many instances, these supplementary sources have become more unpredictable and smaller in size. Overall, six years following the start of the Great Recession, fiscal tensions remain across counties, with inflation-adjusted general revenue fully recovered in only 46 percent of counties.2


Counties have adopted additional fiscal solutions, but they


are not sufficient to cover the needs of their residents and communities. Some states allow counties and other local governments to create special-purpose taxing districts to fund specific services. But counties are also turning to more innovative solutions, such as service sharing and merged service provision with cities or other counties. Further relief requires both the state and federal government to curtail their reliance on unfunded mandates to accomplish policy objectives. Additionally, counties must be empowered to more ably self-govern including in matters related to revenue generation and provided the necessary funding to implement any additional mandates.


State limitations include restricting the types of taxes counties may impose, limitations on the rates of permitted taxes, the total revenue collected and property assessments, along with an obstacle-strewn approval process.


This study examines the pressure facing counties, including state limits on their ability to raise revenue and state and federal mandates. This includes a breakdown of county revenue sources. A discussion of the state limitations on property taxation and sales taxes follows. The report also examines the pervasiveness of state and federal mandates, which further complicate the fiscal dilemma. Lastly, several developing fiscal challenges are discussed along with some of the promising ways in which counties seek to overcome fiscal shortfalls.


The reader can access the information for each state through interactive maps and individual state profiles at ww.naco.org/StateLimits and County Explorer available at explorer.naco.org


NATIONAL ASSOCIATION of COUNTIES | NOVEMBER 2016 COUNTY LINES, SPRING 2017 55


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