The process of developing a balanced budget for county and city governments was the topic of discussion at this month’s meeting of the Interim Joint Committee on Local Government.
Committee members heard an overview of local revenue sources and the largest expenditures counties face as they provide residents with infrastructure, public safety and other vital services.
Property taxes, occupational license fees (payroll tax) and insurance premium taxes are the three largest sources of locally levied revenue for Kentucky counties, accounting for around 88% of county-generated revenue. The remaining 12% includes 911 surcharge fees, transient room taxes, real estate transfer taxes and other taxes.
However, not all counties have an occupational license fee or insurance premium tax. KACo Executive Director Jim Henderson told committee members that 84 counties levy an occupational license fee, and 47 counties have some type of insurance premium tax. That means some counties are more heavily reliant on property taxes, while others have an occupational license fee as the largest source of revenue.
“When you see these statewide numbers, you talk about the percent of the budget for counties, it’s really important to know that in particular counties, it’s a huge number both ways [property tax or occupational license fees],” Henderson said.
The two largest areas of expenditures for counties are road maintenance and jails. Counties maintain more than half of all road miles and a third of all bridges across Kentucky. Other county responsibilities include animal control, law enforcement, emergency management and elections.
Committee members also heard testimony from the Department of Revenue, Department of Insurance, the Kentucky Occupational License Association and the Kentucky League of Cities.
Todd Ruckel, executive director of the Kentucky County Judge/Executive Association, and Magoffin County Judge/Executive Matt Wireman outlined the budget process, which involves several months of planning and review.
Wireman said increasing costs for fuel and materials, combined with limited revenue, has made it a challenge to recruit and retain county personnel.
“When [counties] have a finite amount of money that we raise and that we have to spend annually, and we have constraints on revenue growth, I don’t know what counties and cities are going to do to maintain and keep quality staff,” Wireman said.
Click here to watch the full committee meeting.
