Why Care?

What local sales tax drop means to you

By Holli Keaton (Contact) | Troy Messenger

Published Saturday, August 29, 2009

For every dollar you spend in Pike County, you’ll have to dish out an extra 6 cents.

And in most shopping trips, that $1.06 doesn’t take long to add up.

But, it’s not just adding up for the pocketbooks of consumers, it’s adding up for local governments and schools, as well — or lately, not adding up.

All of Pike County’s entities that benefit from sales tax revenues have discussed taking big hits in sales tax losses in the last months.

It may sound like just a number, but the impact in sales tax drops could mean more than the average consumer realizes.

But just how much?

For the city of Troy, it’s a third of its general fund income. For Pike County Schools, it’s half of its local dollars. And for Troy City Schools and the city of Brundidge, it’s a similar story.

The Pike County Commission, who only sees about 14 percent of its total income from sales tax dollars hasn’t been hurt quite as much.

But all around, Pike County’s government and school bodies are having to stretch their local dollars further as people keep their money in their pockets.

“There’s been an increase in savings rates the past couple years that we haven’t seen in a long time,” said Judson Edwards, economics professor at Troy University. “And what is also bad in a time like this, during economic crisis, communities built on sales tax revenues are hit really bad.”

Of the 6 percent sales tax in the state, 4 percent is distributed to the state, 2 percent to the cities of Troy and Brundidge and 2 percent to the county and school systems.

Troy City Clerk Alton Starling said the city’s sales tax losses are about $300,000 for the year so far. And, in the approximate $15 million general fund budget, one-third of the total budget comes from sales tax funds.

“When that’s your No. 1 revenue source, that’s (a substantial drop),” Starling said.

Money generated from sales tax in Troy can’t be pinpointed exactly to where it’s spent, but it’s used to fund several different services provided by the city, Starling said.

“It’s to run your executive department, it’s for insurance, lawyer fees, life and health insurance, employee salaries, the summer feeding program, agencies we allot to like East Central Mental Health, the Pioneer Museum, the economic development office, the chamber, it operates the library, police department, nutrition center and the fire department,” Starling said.

And, when sales tax figures decline, Troy has to take a harder look when it plans for next year’s budget.

Though Starling said he doesn’t know what will have to be cut yet, he does know the revenue budgeted for next year will decrease.

The city of Brundidge has a substantial part of its budget in sales tax income, as well.

But, Administrative Assistant Linda Faust said the city has only lost about 4.41 percent for the year, which is around $18,000.

“(It’s) not that bad,” Faust said. “We kind of feel a little blessed in that area because of the fact we hear so much about other governments.”

For local school systems, already facing funding shortfalls from the state, sales tax decreases take big tolls.

“It’s been our bread and butter for the last five years,” said Pike County Schools Superintendent Mark Bazzell.

Of the 6 percent sales tax revenues, Troy City and Pike County Schools split 1 cent. And another is split 25 percent for the Pike County Commission and 75 percent is divided between the school systems based on population.

Bazzell said Pike County Schools has lost about $146,700 compared to the same time last year, totaling around 6.2 percent decrease.

By the end of the budget year, which is Sept. 31, he expects the total will jump to $187,000.

Troy City Schools has seen a similar decrease of around 6 percent, which totals nearly $140,300, said Superintendent Linda Felton-Smith.

Schools are funded with federal, state and local revenue sources, but sales tax is nearly half of the local revenue funding.

That’s about 25 percent of each respective budget.

Bazzell said it’s this local money that enables the school system to have some freedom when it comes to spending.

“Federal dollars for the most part come in with a lot of restrictions on how we’re going to spend those dollars,” Bazzell said. “We have very little discretion on how we can spend that money. It’s the local money that allows us to do those extra things.”

Things like funding 13 local teaching positions, upgrading facilities at each of the schools and a global studies academy are some of what local sales tax pennies fund.

“There’s just a lot of things we would not be able to do without those local revenues,” Bazzell said.

Felton-Smith said the Troy Schools System also uses the money to fund local teacher positions.

“It allows you to provide more offerings than what you offer based on foundation program and federal dollars,” Felton-Smith said. “If we lose local sales tax, it’s going to be the bare minimum.”

The Pike County Commission, which only receives 25 percent of one penny in sales taxes, hasn’t quite taken the hits as hard as other entities.

“The total revenue for our budget is $5.1 million, and of that what comes from sales tax is $700,000,” said County Administrator Harry Sanders. “That’s only about 14 percent of our budget. That’s why the impact for us is not felt as much. That combined with we haven’t had sales tax revenues except since 2007.”

Still, that doesn’t mean the county, who uses sales tax revenues to fund all county offices except the road department, isn’t experiencing its share of losses.

That’s about a $48,000 drop for the year.

Pike County Chamber of Commerce President Jenniffer Barner said it is just for reasons like these that when county residents do spend, they spend at home.

“The Chamber promotes shopping at home,” Barner said. “We are a strong county, we have great people here, a great quality of life, good infrastructure, and keeping our dollars here just makes sense. “We should all strive to support Pike County in all areas and understand how that support affects each of our lives.”

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