By Holley Ulbrich | Every year, the Office of Revenue and Fiscal Affairs publishes a report on local government revenue—where it comes from and how it has changed over time.
The latest one came out about six months ago, and if you like to tease a story out of numbers, this report offers an interesting picture of what has happened to state aid to South Carolina local governments—cities, counties, school districts—between 2007 and 2013. That span of years covers the implementation of Act 388. It also gets us pretty well into the recovery from the great recession of 2008-2010.
By itself, the report doesn’t tell you everything you need to know, because the need for revenue at the local level is driven by changes in the prices they pay for their inputs—electricity, computers, wages and salaries, employee health insurance, paper, and building maintenance. Revenue needs are also driven by growth in the population they serve. More people need more garbage trucks, more classrooms and teachers, more police, more road repairs, and even more tax collectors. So, if we supplement the report with census figures on population growth, state Department of Education figures on school enrollment, and U.S. government figures on the inflation rate, we can come up with a pretty clear answer to what has happened to the fiscal resources that local governments in South Carolina have had available to finance those services we expect them to provide.
Local governments raise a lot of their own revenue. They also get some from the state, and some from the federal government, although that’s a much smaller share. According to the report, per capita local government revenue rose from $3,062 in 2007 to $3,238 in 2013. So far, so good. Oh, wait, there was some inflation in those six years. When we adjust for inflation, per capita local government revenue in 2013 drops to $2,826 compared to $3,062 in 2007. Not so good.
Local governments are being asked to do more with less. Many, but not all, local governments have raised their property tax mill rates, within the limits allowed by state law, but that has still left them with less money, because they are getting a lot less from the state. For example, the amount that counties received from the Local Government Fund dropped from $97 to $45 per person during those six years.
School districts are much more dependent on the state than cities and counties. Looking at the change in school revenue, which we measure per pupil rather than per capita, we run into the complication of Act 388 and property tax relief. Act 388 doesn’t show up in the figures for fiscal year 2007, which ran from July 2006 to June 2007. Is Act 388 money replacing local property tax revenue, as proponents of the law claimed when it was passed, or is it state aid to education, which they are more likely to call it now?
If we take Act 388 out of the picture, because it reduced the amount of revenue that local governments could generate from the property tax, the figures for state aid are pretty dismal. In 2007, school districts received state aid from various sources—grants, existing property tax relief programs, and EIA (Educational Improvement Act) and EFA (Education Finance Act) programs—in the amount of $4,457 per pupil. Between 2007 and 2013, leaving out the new property tax relief program, there was a modest increase in total state aid to schools of just over $69 million dollars, with some drops in the bad years in between. But even after state budget revenues picked up, by 2013 per pupil state aid had dropped to $4,172 compared to 2007. After adjusting for inflation, state school funding had a purchasing power of only $3,640 per pupil compared to 2007. So you think the public schools are getting worse? Maybe we’re getting as much as we’re willing to pay for!
U.S. Sen. Daniel Patrick Moynihan, D-N.Y., once famously said that we are all entitled to our own opinions, but not to our own facts. You may read the meaning and implications of these numbers differently from someone else, but at least we can all start from the same numbers. The numbers can help us to reflect on whether the amount of revenue the General Assembly raises and the way that they appropriate it among state and local public services is what we, the citizens, would like them to do. Perhaps good numbers can start some good conversation.
Holley Ulbrich of Clemson is a noted economist who is senior scholar at the Jim Self Center on the Future at the Strom Thurmond Institute at Clemson University.
We Can Do Better, South Carolina!