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County Sales Tax Revenue Eroding in Midst of Economic Recession
January 12, 2009
County Sales Tax Revenue Eroding in Midst of Economic Recession
If you need any more evidence that the economic recession is hitting New Yorkers hard, here it is. New Yorkers are buying less and sales tax revenues are down dramatically, which is cause for concern for county governments, and the local governments who share those sales tax receipts to provide essential public services.
“These numbers are troubling and indicate that the worst may not yet be upon us,” said NYSAC Executive Director Stephen J. Acquario. “Counties are closing their books on very difficult year knowing that the economic conditions of 2009 are even more tenuous, with proposed reductions in state reimbursement, increasing unemployment and a recession that has yet to hit bottom. Governments at all levels may need to re-estimate revenue for 2009.”
The latest sales tax numbers are showing steep declines in county sales tax revenues as a result of the slowing retail sales activity in the last three months of 2008, according to the New York State Department of Taxation and Finance.
“Counties have two primary streams of revenue—property taxes and sales taxes—and when one of those is reduced, as these sales tax number indicate, counties are faced with difficult budgetary decisions,” said NYSAC President Sarah Purdy. “We have been watching county by county economic conditions worsen for the past several months and now the numbers are proof of that deterioration.”
To rein in property tax increases over the past 15 years and to cover the cost of required state programs like Medicaid, Preschool Special Education, and new jail construction, counties have become more reliant on sales taxes. Sales tax revenues were the fastest growing revenue source for counties to use to pay for state required services over the last decade, and are now the largest revenue source for most counties, according to the State Comptroller*.
“This decline in revenue should be equally disconcerting for the cities, towns, villages and school districts who share sales tax revenue with their county,” said NYSAC’s Purdy. Forty-three counties have sharing agreements with the local governments, and in some cases school districts, within their counties.
Counties that are hubs of major retail activity, including Erie, Monroe, Onondaga, Albany, Orange, Westchester, Nassau and Suffolk, as well as New York City, are seeing significant drops in sales tax revenue over the same period last year, from 4.5 percent to over 9 percent less compared with the fourth quarter of 2007.
“As much as 80 percent of a county budget funds state mandated programs, which we can’t reduce to make up the loss in sales tax revenue. We need fewer mandates and more flexibility to manage our own governments, and this economic crisis presents us with an opportunity to do just that,” said Acquario.
The reduction in sales tax receipts also impact the State of New York, which receives at least 4 percent of every purchase in the state subject to sales tax. These latest numbers, coupled with increased unemployment figures that will lower the state’s income tax receipts, will likely further erode the 2009-10 State Budget revenue projections.
The New York State Association of Counties is a bipartisan municipal association serving all 62 counties of New York State including the City of New York. Organized in 1925, NYSAC’s mission is to represent, educate and advocate for member counties and the thousands of elected and appointed county officials who serve the public.