In county budgeting, population growth outpaces tax increases, says OPE

by Ruth Brown, Idaho Reports

The Office of Performance Evaluations released a report on county revenue to the Idaho Legislature, outlining sources of revenue in the state’s 44 counties and highlighting how Idaho’s population growth has outpaced revenues.

The evaluation was presented to the Joint Legislative Oversight Committee on Thursday.

“Idaho’s rapid population growth has contributed to an increased demand for local services. County officials struggle to find ways to pay for those services while considering the tax burden on property owners,” OPE Director Rakesh Mohan wrote in a letter to the committee. “This struggle is evident in discussions about property taxes, which are a key component of county revenues. Unfortunately, these discussions are hampered by limitations in the availability, uniformity, and specificity of data.”

Mohan told the committee Thursday that even though the reports may have policy implications, OPE does not make recommendations about legislation.

The OPE evaluation looked at the historical impact of levies and property tax exemptions on county budgets, the revenue picture and funding sources in counties and the impact of state and federally owned land on county budgets.

Other revenue sources listed in the report included new construction fees, voter-approved bonds and voter-approved levies.

OPE’s report noted that from 1996 to 2016, Idaho’s population grew 39%, from 1.2 million to 1.7 million, while county budgeted revenue only increased by 27%. In contrast, the U.S. population grew by just 20% in the same timeframe, while U.S. counties’ budgeted revenue grew by 46%, according to OPE.

Among overall county revenue, “we found that Idaho’s total budgeted county revenue (adjusted for inflation) in 1996–2016 grew slower than the state population,” the report says. “Idaho’s trend was unlike the national trend where revenue outpaced population growth.”

“County Revenues” Dec. 2020 Report | Office of Performance Evaluations

Property taxes in Idaho are a local government tax and are the counties’ largest source of revenue. The so-called budget cap in Idaho limits increasing the portion of the budget funded by property taxes to 3% above the highest budgeted amount from the previous three years. The budget cap constrained 15 Idaho counties in tax year 2017 and 20 counties in 2018.

The OPE report also outlined the state’s levy constraints. When property values are increasing faster than property tax budgets, much like in Ada County, the levy rates decrease, OPE’s Amanda Bartlett explained to the committee.

The report explained “20 counties were limited in one or more of the four major levies in tax year 2018. However, if those levies were combined into a single general purpose fund, the number of counties constrained by levies would have dropped from 20 to 2 without an increase in the aggregate levy amount.”

Bartlett said the budget cap largely impacts counties that do not have a lot of new development and those that don’t have previously foregone taxes available to use. While some counties, such as Ada and Canyon, have seen regular new development, other areas are fairly stagnant and don’t collect many new development fees.

Idaho is also home to 33.4 million acres of federal land and 2.6 million acres of state-owned land, according to OPE. That land does still use some public services, such as road maintenance and fire suppression. But compensation to counties for state-owned land applies only to land owned by the Department of Fish and Game.

”In county fiscal year 2019, the Department of Fish and Game paid $235,641 to counties. Nez Perce County received $56,886, the most of any county. Fifteen counties received less than $1,000,” according to OPE.

When private property becomes public, it affects tax revenue, too. Seth Grigg, executive director of the Idaho Association of Counties, cited a recent example in Benewah County, where a privately owned property was transferred to the state, decreasing the county’s tax base by roughly 23 percent. 

OPE said there were some limitations with uniform data among the counties, and cited access issues with other documents. Idaho statute requires access to those budget documents in a centralized data repository.

Bartlett said the major issue with data on county revenues was accessibility, uniformity and specificity.

One bill recommended by the interim property tax committee seeks to address that issue. House Bill 73 would gradually replace the existing local government data repository, maintained by the Legislative Services Office, with a uniform accounting system for all cities, counties and taxing districts in the state. The state controller would maintain that new system and uniform reporting requirements, then publish the local government financial data on the Transparent Idaho website where state-level data is currently reported. 

Logan Finney contributed to this report.

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