NCACC Taxation and Finance policy statement

Guiding Principles

• The level of government most capable to delivering public services should provide them.
• Counties must have sufficient revenue authority to meet public service needs.
• Counties must have access to a broad and balanced revenue base.
• The state should not mandate programs requiring county financial participation, and state-generated revenues should fund basic state services.
• The state should provide timely and tailored information to sustain county revenue, budget and financial management integrity.

Introduction

The North Carolina Association of County Commissioners believes that the level of government most capable of delivering essential public services should be responsible for providing them. In order for counties to be effective partners with the state and federal governments, counties must have the authority to generate optional local revenues that are sufficient to meet public service needs while being responsive to economic change. The county revenue base should be broad and balanced, permitting counties to raise revenues from various sources rather than being overly dependent on any single revenue source or overly burdensome on any one group of taxpayers.

A proper balance of service responsibility and revenue-raising authority is imperative for effective county governance. Any restructuring of county responsibilities should be coupled with a restructuring of local revenue sources to meet those responsibilities.

County Revenue Authority

The property tax system is the mainstay of the county revenue base and the Association will continue efforts to make the property tax system more efficient and equitable. The Association will also seek to broaden and diversify the county revenue base to include appropriate optional sources that are responsive to economic change and equitable in terms of impact on residents.

The Association believes that county revenue authority should reflect the following:

• Counties should have authority to generate optional revenues sufficient to meet their responsibilities, especially for those programs already mandated by the state and federal governments.
• New taxing authority should not be seen as encouragement for new state and federal mandates.
• The Association opposes the redistribution of existing revenues, and no redistribution of new tax sources should be implemented without assessing taxpayer equity as reflected by local needs, local funding efforts, and local funding capability.
• The General Assembly should reimburse from state sources individual county and city losses if statewide policy objectives necessitate reductions in local tax bases.
• The General Assembly should recognize that county funding obligations do not diminish when local revenue base exemptions and exclusions are granted to specific groups and county revenue generation is reduced, with the result that the tax burden is shifted from one local constituency to another.
• The General Assembly should evaluate existing local revenue base exemptions and exclusions to determine if they have achieved their intended tax policy objectives. New or extended exemptions and exclusions should include a “sunset” date in their authorizing legislation.
• Local government tax revenues should not be earmarked for specific programs, functions or services.

Financing Mandates

County officials recognize their responsibilities for carrying out policies formulated by the General Assembly. State policy makers should recognize county revenue base limitations and variations in revenue-producing capabilities among counties and should not mandate programs requiring county financial participation.

The Association believes that mandated programs should be financed as follows:

• Where the state has mandated county financing in broad terms, permitting county discretion in service levels, counties should have the primary financing responsibility.
• Where the General Assembly has set a minimum of basic service to be available equally to all state residents, the state should have financing responsibility. County financial participation should be limited to sharing the programs’ administrative costs.
• Where the federal government has initiated services to provide income maintenance for all citizens, the federal government should have financing responsibility.

Fiscal Integrity of Counties

Counties need timely information from the legislative and executive branches of state government regarding budgetary decisions that affect county taxation, budgeting, and fiscal management. In order to enhance the fiscal integrity of counties, the Association will continue to support improvements in financial management practices and reduction of inconsistencies in fiscal procedures among programs administered by county governments.

The Association believes that the continued fiscal health of county government depends upon the following:

• State laws and guidance that provide for sound financial management practices that are adaptable to the special needs of each county.
• Appropriate state agencies should guide necessary improvements in consistent accounting, reporting and auditing procedures.
• State agencies monitoring county programs should not require practices that are redundant, duplicative, or inconsistent with generally accepted principles of budgeting and accounting.