Understanding Local Government Finances James J. Regimbal Jr. Virginia Municipal League Virginia Association of Counties Commission on Economic Development and Job Creation

Most Local Government Expenditures are Mandated or Regulated by the State Source: Auditor of Public Accounts Comparative Report of Revenues and Expenditures 2

…Even Though the State Provides Only 32% of Total Local Funding 3

…And FY 2009 Was the High Water Mark for State Funding 4 4 * Includes all state fund sources (mainly GF and Lottery) and appropriated federal stimulus $

Important to Keep a Mix of Local Revenues Locals depend too heavily on real estate taxes Source: Auditor of Public Accounts Comparative Report of Revenues and Expenditures 5 Note: BPOL is the Business, Professional and Occupational License Tax. M&T is the Machinery and Tools Tax

There is Wide Variation in Local Reliance on BPOL and M&T Taxes 6 (Both in terms of percent of revenue and absolute dollars) Source: FY 2009 Auditor of Public Accounts Comparative Report of Revenues and Expenditures

BPOL and M&T Growth Less Than Other Local and State Revenue Sources 7

8 BPOL and M&T Revenues Are Similar in Amount to the Car Tax Reimbursement, Corporate Income and State Motor Fuel Taxes 8 (If state corporate income tax ended, which programs should be cut?)

Tax Reform Should Be Holistic Any tax change should be broad-based and not focused on “fixing” a single revenue source. Elements of tax change should include: – Funding of core services (why we have taxes) – Fairness to taxpayers – Economic competitiveness (VA currently ranks high in business competitiveness) 9