Written by Anya Nowakowski, CIC Research Assistant.
Counties depend on the strength of their economies to generate healthy revenue streams. The U.S. economy has been recovering overall, even that unemployment rates are still above seven percent and housing prices are still below pre-recession peaks. While the data from the U.S. Census of Governments on 2012 county revenue sources has not been released yet, the 2007 figures provide a baseline for counties’ sources of revenue before the recession.
Counties collected more than $525 billion in revenue in 2007, with more than a third coming from taxes such as residential property taxes, commercial or business property taxes and personal property taxes. Property taxes are the bulk of the tax revenue raised by counties, at almost 60 percent. While the 2008 housing crisis affected counties’ residential property tax revenues, the strength and timing of the effects vary county by county. There is often a lag in the effect of changes in housing prices on property tax revenue since properties are taxed on the assessed values of the houses, which may lag for years if the county has a long assessment cycle.
Counties draw another third of their revenue from other levels of government, mainly from the states. Eighty-three percent of the county revenue from other governments came from the states, showing that counties are creatures of the state. This allocation of state money does not come entirely from state sources, but often from federal formula allocations. Because states mix state funding with federal funding in the allocation to counties, it is difficult to track federal funding going to counties through the states.
A little known fact is that charges and other general revenue sources generate 21 percent of the counties’ revenues. These charges vary from charges on commercial activities to solid waste, sewerage charges and highway tolls. Charges from public hospitals deliver almost a quarter of this revenue stream, showing one of the aspects of the relationship between counties and health care.
Within the constraints set by the states, county leaders continue to adjust budget policies to adapt to the changing economic circumstances.