AAC
pandemic-produced recession, and all 75 counties took a size- able reduction in highway turnback dollars. Wow, that hurts. Arkansas counties have around 50,000 miles of county roads while the state of Arkansas has 16,382 miles of state highway. According to law, “a county is a political subdivision of the state for the more convenient administration of justice and the exercise of local legislative authority related to county affairs.” We receive “county aid,” or as most of us call it “gen- eral turnback” from the state to help cover the cost of state services administered at the county level. Tis source of rev- enue does not come close to covering the costs, but it helps. However, when the state suffers revenue loss counties share in that loss many times. Te legislature met in special ses- sion in March and reduced the state general budget for the final quarter of their fiscal year, which ends June 30. Counties suffered a 12.59 percent re- duction in FY 2020 general turnback. Ten in April the legislature convened for the even num- bered year Fiscal Session to enact the budget for the state FY 2021 — July 2020 through June 2021. We took a 15 percent reduction in general turnback in that budget. Te good news is that it could have been worse, but the state of Arkansas had reserves that helped buffer losses. Tat brings me to my two-pronged reason for this article: (1) the most stable source of county revenue; and (2) the urgent need for counties to build reserves, especially general reserves. Te effect of a recession on revenue collections often trans- lates into one or more of the following policy alternatives:
T
• Change the tax structure to rely less upon recession- sensitive taxes;
• Raise the tax rate to increase tax collection totals; • Cut expenditures to match available revenues.
Something counties have unwisely done on occasion is bor-
row funds (debt financing) to cover the difference between available revenues and expenditure commitments. By the way, that is illegal for Arkansas county government. Counties are prohibited from paying interest except for bond issues
COUNTY LINES, SPRING 2020
SEEMS TO ME ...
and short-term financing through Amendment 78. And the short-term financing option is available only “for the purpose of acquiring, constructing, installing or renting real property or tangible personal property having an expected useful life of more than one year.” [Arkansas Constitution, Article 16, § 1 and Amendment 78, § 2] So what is a county to do? I suggest a combination of the policy alternatives listed above. Te first thing a county must do is make the tough decision. Cut expenditures to match available revenues if you don’t have adequate reserves. If you face large cuts, more than likely the cuts will include personnel. Next, evaluate the county’s tax structure. Many counties
he first thing a county must do is make the tough deci- sion. Cut expenditures to match available revenues if
you don’t have adequate reserves. If you face large cuts, more than likely the cuts will include personnel. Next, evaluate the county’s tax structure. Many counties are relying too much on sales taxes that are recession senstive.
are relying too much on sales taxes that are recession sensi- tive. It’s like the old adage, “Don’t put all your eggs in one basket” — meaning if you rely too much on one resource, if it fails you have no alternative. Te key word here is diversi- fy; don’t put all your eggs in one basket. What’s not sensi-
tive to recession — or at least much less sensitive? Property taxes. Te property tax is the most stable source of county
revenue. Te reason is that there are consequences to not paying property taxes. You can’t get your vehicles licensed if you have delinquent personal property taxes. If you don’t pay your real estate taxes your property will be certified to the state of Arkansas after a year, and if you don’t redeem your property at the state level after a set period of time by paying the delinquent tax, penalty and costs your real estate is sold. You can count on property taxes being paid. By the way, Snoopy was wrong. He was barking up the
wrong tree when he wrote saying, “Dear Tax Collector, I am writing to you to cancel my subscription. Please remove my name from your mailing list.” Tat’s not how it works. When you own taxable personal property and/or real estate, it is assessed; goes on the tax books; a tax statement is sent; and property taxes are collected and distributed to the proper tax entities. Property taxes in Arkansas are some of the lowest in the country. Property taxes are at the top of the list when it
See “Diversify” on Page 20 >>> 19
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