County officials are fighting to keep local government off the ropes.
Almost a year into his fourth term, Clay County Council President Mike McCullough said this might be the toughest year of budget hearings he has encountered.
"It seems to get tougher every year, but this time around may be the toughest I have been through," he said.
Since the inclusion of the Circuit Breaker through property tax caps, the county, along with all other taxing units, has seen a drop in its available funding.
"Our backs are definitely against the wall to institute a Local Option Income Tax (LOIT)," McCullough said. "However, the county is not backed into a corner as much as some of the other taxing units because we have our Rainy Day Fund."
While the Rainy Day Fund is available, McCullough admitted the county can't rely on it.
"With the tax levy funding decreasing because of the Circuit Breaker, if a LOIT isn't passed, we would probably drain the Rainy Day Fund in the next couple years."
Clay County Auditor Mary Jo Alumbaugh told The Brazil Times the state is estimating the shortfall for all taxing units to be $248,986 in 2010 and $507,438 in 2011.
"This is just a guess by the state, which is why we are conducting a Circuit Breaker Impact Review to determine an exact amount," she said.
Alumbaugh added not only are taxing units losing funding from property taxes, but from miscellaneous revenue as well.
"Counties and local governments have to find other means of generating income," Alumbaugh said. "The state has taken away the ability to raise the total amount collectable from property taxes, and almost forced a shift to taxing personal income."
McCullough said some of the loss is coming from reduced interest rates and increased unemployment.
"Residents' incomes are down, and interest on investments are way down right now," he said. "I will be very surprised if every county in the state has not passed a LOIT within the next couple of years."
When it comes to instituting a LOIT, the county has three potential options:
* Operating (Levy Freeze) LOIT -- Freezes the maximum property tax levies for civil units of government and replaces the annual maximum levy growth with income tax (LOIT) proceeds. This is capped at maximum of 1 percent and would have to be recertified annually by the Department of Local Government Finance (DLGF),
* Property Tax Relief LOIT -- Allows a county to adopt an additional County Adjusted Gross Income Tax (CAGIT) to either provide local property tax replacement credits on all property, provide or increase the homestead credit percentage uniformly or provide local property tax replacement credits on qualified residential property. This option is essentially a dollar-for-dollar replacement for lost funding and can be raised in increments of 0.05 percent up to as much as 1 percent, and
* Public Safety LOIT -- Allows a county to adopt an additional CAGIT for Public Safety purposes (fire, police, etc.). In order to utilize this option, at least one of the first two options must be adopted in conjunction, and this rate may be set at a maximum of 0.25 percent.
Although the county council is preparing for its own budget hearings, the burden is on them to make this decision for all of the county's 23 taxing units.
"Some of the units, like the City of Brazil, may be in tougher situations financially right now," McCullough said. "We may be in a decent situation, but we can't sit on this decision because a LOIT would help every taxing unit. I don't like the idea of adding a tax, especially with residents struggling as it is, but it's coming down to either instituting a LOIT or cut services."
Alumbaugh said due in part to the reduction of property tax and miscellaneous funding, approximately an additional $1.7 million will be needed to fulfill all of the county's levy funds, based on budget requests, going into the hearings.
McCullough added the council will be looking to make what cuts they can without affecting the level of services too much.
"A lot of the office's budgets stayed pretty flat, and some of the requests have even gone down," he said. "A lot of the requests for increased are coming for salaries, and there are big increased in the Commissioners, Sheriff's and Jail budgets."
However, McCullough said some of the large increases are inevitable.
"The Commissioners budget has things like the employee health insurance and other things that we can't control," McCullough told The Brazil Times. "Then another big increase is the election budget since there wasn't one this year, but we have the primary and general election next year."
Despite the added stress on the council to do as much as they can with less funding available, McCullough is confident they will be successful.
"We've had bleak forecasts before, but we have gotten through them, and I am confident we will be able to do it again," he said. "The budget hearings are open to the public, schedules are available at the courthouse for them to see when we will be looking at a certain budget, and I absolutely encourage residents to attend."
The Clay County Council will conduct its annual budget hearings Sept. 1-3 (Tuesday-Thursday), starting at 9 a.m., each day in the Commissioners' Courtroom at the Clay County Courthouse.