Explaining tax increases to residents is difficult for any elected official, but unfortunately, it’s one duty county officials around the state have had to do. Taking a look at the most recent available data — from 2006 — it may be difficult for taxpayers to comprehend why 52 counties were forced to increase their tax rates that year, back before the slowdown in the housing market hit, when the state’s economy was in relatively good shape and property values were generally increasing.
Counties and other local governments are required to calculate the effective tax rate, which tells them where to set the property tax rate in order to bring in exactly as much money as was generated in the previous year. Given that, wouldn’t a reasonable person conclude that counties could have lowered their rates and still collected more taxes, thanks to a combination of growth and inflation?
The real world is not quite that simple and counties must deal with a complex array of issues when formulating their budgets.
Looking at the most recent tax data available shows that the majority of counties — 161 out of 254, or 63.4 percent — did, in fact, lower their property tax rates in 2006. However, 20.5 percent of counties were forced to increase their tax rates, while the remaining 16.1 percent (41 out of the 254 counties) maintained their existing tax rate. And, according to the state Comptroller’s office, there was an 11.9 percent change in the dollar amount of taxes levied by counties between 2005 and 2006, but that includes much new construction in our high-growth state, as well as property taxes levied in support of bond issues approved by voters in local elections.
Circumstances vary, of course, but a number of factors that could be described as “uncontrollables” or “cost drivers” can push budgets up faster than property values are increasing.
Collecting property tax information each year is a slow process since all local governments must finalize their tax rates and budgets first, and then the Texas Comptroller of Public Accounts must spend several more months slowly checking and verifying the information received. So 2007 data will not be available until later this year, but the impact uncontrollable costs have on county budgets will remain significant until the Legislature stops its practice of passing unfunded and underfunded mandates, and finds a funding solution for current mandates already in place.
Consider the following data prepared by the Texas Association of Counties’ County Information Project:
Indigent Defense: The Texas Fair Defense Act, passed in 2001, is a good example of an underfunded mandate from the state. Specifically, in the year before the new law took effect, counties spent $91.4 million on legal defense for poor people. Last year, total funding from both the state and counties totaled $160.9 million – and the state pitched in only $11.8 million. Between 2001 and 2007, counties’ expenditures for indigent defense increased by $69.5 million, approximately 5.9 times the state’s 2008 contribution of $11.8 million. (The 2008 expenditures from the counties will not be available for a few months although the state’s 2008 grant award amount is included on the chart.)
Blue Warrant Inmates: Blue warrant inmates are parolees from the state prison system who are charged by their parole officers with violating the terms of their parole. Traditionally, the paper warrants were in a blue jacket — hence the name “blue warrants.” Often, the parolees had not broken any criminal laws; the worst thing they might have done would be failing to show up for an appointment with the parole officer or associating with others who had also broken the law. Sometimes, parole officers will say they need to put someone in the county jail a few days for what they call “jail therapy.” As the chart shows, this expense can fluctuate with the seasons. But on the whole, it just keeps creeping up year after year. From January 2001 to July 2008, there was an 18.4 percent increase in the number of blue warrant inmates in Texas county jails on the first day of each month — from 2,000 inmates to 2,368 inmates. While an 18.4 percent increase over seven years may not sound all that outrageous, during this period the number of blue warrant inmates peaked at 3,172 in January 2008, up 64 percent from a low of 1,939 in May 2001. The current short-term downward trend shown on the chart in the number of blue warrant inmates is unlikely to continue given past trends. The cyclical nature of the overall trend, when combined with the growing population, is certain to result in future increases.
Law Enforcement Officers: County officials cannot control the crime rate, other than to provide the resources for patrol officers and jailers. But when crime goes up, citizens have a right to expect more protection and are seldom hesitant to demand it. This chart with data from a 2008 survey provides an indication of the number of counties that felt compelled to increase law enforcement expenses. Of the responding counties, 81 were able to provide the number of budgeted law enforcement positions for both 2001 and 2008. Note that 49 of those 81 counties increased their law enforcement personnel over the last seven years by more than 10 percent, including 27 that increased their personnel by 25 percent or more.*
Attorneys in Family Law Cases: Frequently the Legislature passes laws for worthy reasons but fails to provide funding. For example, in 2005 Senate Bill 6 was enacted that required counties to appoint attorneys for indigent parents who oppose temporary managing conservatorships of their children — not just when parental termination is sought, as in the past. This unfunded mandate was in part responsible for the 56.7 percent increase in the average costs for court-appointed attorneys in family law cases from 2005 – 2008.*
Contributions to Volunteer Fire Departments: Many counties have a volunteer fire department that receives some type of monetary compensation from the county. From 2001 to 2008, the average contributions to volunteer fire departments grew 42.6 percent. A significant number of counties were able to respond to this question with partial or complete data in the 2008 County Expenditures Survey.
Services to the Elderly: Counties are continuing to experience a dramatic increase in the average cost to feed their elderly and disabled citizens. The cost incurred by counties is partially offset by the financial assistance of House Bill 407, enacted during the 80th Legislature. HB 407 permits counties to leverage their funds with a state grant program (Texans Feeding Texans) in order to provide more meals to the elderly. The average cost to feed the elderly increased 62 percent from 2001 to 2008. Texans Feeding Texans is being tweaked to facilitate better participation from meals-on-wheels providers. The trend as shown in the chart will continue to climb as the program becomes more popular among counties.*
HAVA Voting Equipment: The number of counties that provided HAVA information to TAC varied by year. Reimbursements to those counties have evened out the cost of purchasing and training on the machines in some cases. However, while Congress sent some funding, it was sometimes two or three years after the county purchased the equipment, meaning counties basically loaned the money to the federal government, interest-free. In the long-term, the reimbursement was primarily for buying the equipment, but no money was provided for storage and maintenance, not to mention the costly software programming that must be performed prior to each election. The chart shows the counties’ average costs after they were reimbursed. The 2008 average budget amount also reveals that counties are projecting additional costs for HAVA.*
Emergency Medical Services: In additional to contributions to volunteer fire departments, counties may also support local Emergency Management Services (EMS) with both funding and in-kind contributions. From 2001 to 2008, EMS has witnessed an average increase of 99.2 percent in county expenditures. With medical costs on the rise and with the population increasing in Texas, this upward trend is likely to continue.*
Juvenile Probation: State law strictly regulates the handling of juveniles and juvenile probation, which is administered locally at the county level. The county handles intake of all cases, with probation being ordered by juvenile courts and also through deferred prosecution programs whereby the child does not appear in juvenile court, but is placed on probation by the probation staff. Total expenditures include county support of detention facilities (in the 53 counties with detention centers). Another unfunded mandate was implemented in 1995 when legislation required counties to provide funding to local juvenile probation departments at a level not less than the amount provided in 1994. On average, 65 percent of the budget for juvenile probation departments across Texas comes from county government. For the past four years, the average expenditure amount for counties is around $2 million. With the current legislative changes taking place to the Texas Youth Commission (TYC), counties may incur additional costs if TYC is abolished or if a regional model plan (similar to the Missouri model) is adopted.*
Fuel Cost Increases: For some county drivers, driving less is not an option. From fiscal year 2004 to fiscal year 2008, county budgets for fuel jumped 97.4 percent, including 66.1 percent for law enforcement. Patrol officers must burn fuel if they’re going to cover the far reaches of the county, and road crews can either stay in their precinct barns (garages) or they can burn gasoline to maintain county roads. Other mandatory gasoline trips include hauling inmates to courts and transferring mental patients to state facilities. Recent newspaper articles have reported that fuel costs for many counties have almost doubled in the past year. This dramatic rise in fuel costs has also caused various counties to find creative ways of saving money — some counties are having their road and construction crew switched to four 10-hour workdays instead of their normal five-day workweeks.
Employee Health Insurance: It costs money to keep quality employees providing county services — and not just salaries. To be competitive in the job market, counties must provide health insurance benefits. These are national figures that reflect the rate that health plans have increased in recent years. Between 1999 and 2008, the average cost of health care plans more than doubled. For every $100 spent in 1999, organizations, including counties, are spending $245.68 in 2008. Over the last few years, many counties have increased their employees’ co-pay obligation or reduced the kinds of treatments covered by their insurance policies in an attempt to control cost increases. Counties that are members of the TAC Health and Employee Benefits Pool have escaped much of this cost increase, thanks to the purchasing power of 35,000 lives.
Average Employee Health Care: Even with changes in co-pay obligations and covered treatments, counties are spending more on employee health care. A recent TAC survey shows that responding counties spent an average of $3 million on employee health care in 2006 and are budgeting for large increases in 2008, to around $4 million on average.*
Average Inmate Medical, Dental and Mental Health Expenditures: In addition to providing employee health care, counties are mandated to care for individuals in the county jail. Like employee health care, inmate health care is a growing expense for counties. From 2001 to 2006, inmate health care costs rose 42.1 percent on average for counties that participated in TAC’s 2008 County Expenditures Survey. Counties expect these costs to continue to rise, as the average reported 2008 budget is 74.9 percent greater than average 2001 expenditures.*
Libraries: Not all county expenditures are increasing. Counties are cutting back on discretionary services where they can. For example, average reported library expenditures have decreased every year from 2004 through 2006. This trend is expected to continue as the average estimated 2007 expenditures and 2008 budgets show continued — and possibly accelerating — decreases in library expenditures.*
Fines: Uncontrollables do not always appear on the expenditures side of the ledger. TAC asked counties to report on the amount of fines collected from 2004 to 2006. In addition, counties were asked to provide their estimated 2007 revenue and 2008 budget for fines. While the average collected fines increased from 2004 to 2006, the 2007 estimate shows the potential for this trend to reverse, in which case counties will be forced to either make cutbacks in services or find some way to make up the lost revenue.*
Fees: Collected fees are the total fees collected by counties, while retained fees show the net amount that remains with the counties after the state gets its cut. While fines increased through 2006, both collected and retained fees declined in 2006. The chart shows that retained fees decreased more rapidly than collected fees. Based on average estimated 2007 data and 2008 budgets, fee revenue will continue to fall. Part of the decrease in averages for 2007 and 2008 may be based on conservative accounting/budgeting practices; only time will tell how significantly fee revenue falls.*
* Note: The averages shown on the charts have not been adjusted for inflation. The 2007 values are based on estimates received from the counties, while the 2008 values are based on budgeted amounts instead of actual expenditures. The numbers in parentheses along the horizontal axis indicate how many counties provided data for that year.