Everyone is leery about what the war in Ukraine might do to the economy. Miami University Emeritus Economics Professor Bill Even said the gas price hikes and higher food bills won’t impact the county’s sales tax directly, because those commodities aren’t subject to sales tax.
“How everything else going on in the world is going to impact us over the next 12 months is a big question mark. You really don’t know how this war in Ukraine is going to play out for the U.S. economy as a whole. The Federal Reserve is starting to jack up interest rates, we’re seeing inflation doesn’t seem to be disappearing as quickly as some had hoped it would,” Even said.
“The good news on the sales tax side is if everything costs 10% more and people buy the same stuff, they’re going to pay 10% more in sales tax. The bad news is we’ve got food and gas prices, as they go up that’s not going to drive up sales tax revenue because sales taxes don’t apply to those things. And we might see a larger share of the consumer budget move to those items that aren’t taxed by the sales tax, and we may start to see consumers hold back a bit on their spending.”
The county keeps a monthly dashboard of all the revenues that feed the general fund — the main fund that pays for county services — and for the first two months of this year sales taxes were up nearly 10% and investment income 14.8% and casino fees jumped 17.1% at $1.3 million
County Administrator Judi Boyko said sales taxes have been higher than anticipated in recent years but they will continue to budget conservatively.
“I think that is the million dollar question...,” Boyko said about continued positive revenue collections. “At this point with all of the external forces impacting the domestic and trickle down to the local economy, I think I’m hesitant to say that we will continue to exceed the full year.”
Overall revenues were down 5% with revenues tied to property transfers down and a 41.7% drop in boarding of inmates revenue, it is off by $1.1 million. Chief Deputy Anthony Dwyer said they are still on target to make their $10 million budget, the monthly collections can look out of whack because they are dependent on when payments actually arrive.
“There’s always wiggle room there,” Dwyer said. “Currently based on our billing and our pay-ins and billing we’re on track, we’re less than a couple percent off for the first quarter and for annual we expect to meet our budgeted number.”
Early on in pandemic Boyko estimated a 30 percent sales tax drop, a 10 percent reduction in property taxes due to delinquencies and a 20 percent decrease in property transfer taxes. All tolled she estimated the general fund could be short $20 million by year’s end.
In May 2020 the commissioners convened a meeting with other office holders and department heads to lay out how the deficit will be covered.
The commissioners agreed to empty the $12 million budget stabilization fund and use $1.5 million from a reserve fund that started the year with a $56 million balance to help close the revenue gap. They also directed a 4.14 percent cut across the board and an additional 3.3% cut last year.
The dire predictions never materialized — the commissioners budgeted $109 million in general fund revenues and collected $114 million. However, the county also received $18.7 million in federal coronavirus funding, and $9.5 million was deposited in the general fund. It was earmarked for salaries for people who were “substantially dedicated” to fighting the pandemic, like the sheriff’s people. Strict federal deadlines didn’t give governments much time to spend the money, so most parked the money in that line item.
This year the finances are so rosy the commissioners approved an $18.5 million property tax rollback. Prior to approving the tax break, the 2022 general fund budget called for a beginning cash balance of $119.7 million, revenues are projected to reach $116 million and the commissioners, other office holders and departments plan to spend $107.5 million. It also includes $27.5 million for one-time expenses like a capital reserve fund and $2.5 million contribution to Spooky Nook infrastructure. Non-general fund expenses total $370.5 million.
“The good news is the county has weathered this COVID storm a lot better than everybody was anticipating,” Commissioner Don Dixon said.
“You never know, and the situation the county was in with COVID, and what some of the predictions were from the experts,” Dixon said. “When you’re responsible for somebody else’s money and running the county it’s prudent to err on the cautious side. We took steps years ago where if we ran into a major financial storm we would be able to find our way through that without laying off a whole lot of people, like the last time we had to lay off massive numbers.”
In 2009 Dixon and now Supreme Court Justice Sharon Kennedy, who was the domestic relations judge then, convened a summit of office holders, department heads and business leaders, to deal with what was dubbed a “perfect storm.” They had to layoff hundreds of people to keep the county afloat and take other drastic measures.
Dixon said if the county’s finances remain strong, he envisions more measures like the tax rollback.
“I think you can look forward to more of that, more reductions in what it costs to do business with Butler County in the future, I’m very satisfied where we are.”
The county also has nearly $75 million in federal American Rescue Plan Act money to invest in the county. Commissioner Cindy Carpenter canvassed the county last year asking local groups and governments what they need. She said aside from doling out ARPA funds she wants the commissioners to invest some of their ample funds in other communities. When they erased all general fund debt two years ago they planned to use at least part of the $10 million no longer needed for debt payments to help other jurisdictions.
“Looking at the critical projects that were presented to the commissioners it’s obvious that we need to be supporting economic development. That’s really crucial so I have proposed that we have an economic development fund,” Carpenter said.
“The things that have been brought to our attention are the need to support the communities with economic development, the need to support the communities with roads and thirdly the need to help the communities with their emergency response equipment.”
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