AAC


SEEMS TO ME... Don’t put all your eggs in one basket


Diversify revenues to properly fund county government and build reserves


Tere is a reason for the truth in the last part of that quote. God said, “It is appointed unto man once to die.” Must be true. Secondly, we all want to live in a civilized society which must be paid for — thus “taxes.” Much more recently Jill Lepore, an American Historian


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and professor at Harvard University said, “Taxes well laid and well spent ensure domestic tranquility, provide for the common defense, and promote the general welfare. Taxes protect property; taxes pay for roads and schools and bridges and police and teachers. Taxes pay for hospital and nursing homes.” How true. Taxes pay for those things we desire and demand that government provide. And property taxes at the local level are “well laid and well spent.” Te year 2020 has been a year like none other. None of us has experienced a year like this due to the world-wide coronavirus pandemic. When much of the economy was shut down or restrained due to social distancing, stay-at-home rec- ommendations and some types of business shutdowns several sources of county revenue started declining. Counties were forced to lay off or furlough employees, cancel projects, defer construction and maintenance and more: While at the same time, in many instances, increase spending in some areas for Covid-19 related expenses. Depending on a county’s economic base, some counties


have fared better than others. And those that did the very best were those that had a good diversified revenue stream and a decent level of reserves that could be used to lessen budget cuts and still maintain an adequate level of service to their constituency. Someone once said, “Good lives are lived in the margins of hope and possibility.” Apply that to the life and operation of a county government. Without some level of financial reserves the county has little hope or possibility during an economic downturn or recession. Recessions are events with big-time consequences for tax


growth rates and revenue totals. County government in Arkansas is somewhat more insulated to damage than state government but still experiences declines in revenue. Arkansas state government is hit hard because consumer spending and retail sales fall, decreasing the growth and col-


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n the formative years of our country Benjamin Frank- lin said, “Our new Constitution is now established, everything seems to promise it will be durable; but, in this world, nothing is certain except death and taxes.”


lection totals of sales tax — especially since the state sales tax does not apply to groceries. Higher unemployment and fewer


work hours result in reduced income from personal earnings which, in turn, slows the growth in state income col- lections. During a recession many types of corporations see a decline in profits, which reduces the state’s corporate income tax collections. No county in Arkansas levies county income tax, although state law permits counties to levy a tax on the income of its individuals and businesses through a vote of the electorate. [§ 26-73-101 / § 26-73-109] To my knowledge no Arkansas county has ever exercised this option. Te state of Arkansas funds the highway and bridge


program primarily with fuel taxes. Tat is a tax that has seen severe reduction during the pandemic as travel was somewhat restricted and people were urged to stay home. Fuel taxes cannot be levied by county government. So where does that leave county government in times of re- cession? It is not that we are unscathed but we have different types of revenue and therefore are affected differently than state government. County government has become increasingly dependent upon sales tax over the last 30 years — a tax that is very sensitive to an economic downturn. Yes, the county sales tax declines during recessionary times — even if not at the same rate as the state sales tax since our sales tax is applicable to grocery items. We better thank the good Lord for that. In some of our smaller counties the sales tax on groceries is a large percentage of their sales tax receipts. Other sources of county revenue that are affected during


a recessionary period are user fees; fees charged by county officials for certain services as set out by law; court fines, especially in a pandemic like we’ve had when court sessions were practically nonexistent; and, of course, state revenues received by counties. Arkansas county government has a longstanding agree- ment with the state concerning the distribution of highway revenue taxes and this agreement is codified in law. Te state gets 70 percent and the other 30 percent is divided equally to counties and municipalities. As I mentioned earlier, the sources of highway revenue are various fuel taxes and a one- half cent state sales tax. Both were heavily affected during the


COUNTY LINES, SPRING 2020


Eddie A. Jones County Consultant


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