WASHINGTON -- Like Peter Finch in the movie "Network," counties are mad as hell, and they aren't going to take it anymore.
The "it" is unfunded federal mandates, a sore spot for almost all levels of municipal government. But these mandates are an open wound for counties, which find their revenue needs increasing at the same time their traditional revenue source -- the property tax -- is faltering because of tax revolts, legal limitations, and declining property values.
A preliminary report recently issued by the National Association of Counties reveals that, because of the factors outlined above, 54.3% of the nation's largest counties will probably have to increase taxes and other fees in the current fiscal year.
"Counties are being squeezed as if they were in vise," said D. Michael Stewart, president of the association and a county commissioner in Salt Lake County, Utah. "On one side is the increased demand for services locally. On the other side is the loss of federal and state funding coupled with the rising number of unfunded federal and state mandates."
According to the report, 51% of the counties claiming that tax increases are likely cite increased demand for services as the culprit, while 42% blame increased unfunded state and federal mandates. Thirty-eight percent said increased taxes will be needed to offset the loss of federal and state funds.
'A Rock and a Hard Spot'
But the report also shows that 39.2% of counties are precluded by legal caps from raising property tax rates, while another 39.7% are faced with organized voter antipathy to higher rates.
"They're really between a rock and a hard spot," said Frederic S. Zeldow, a research analyst for the association. "Counties primarily rely on the property tax, but most of them are not able to increase it."
Historically, counties have relied extensively on property taxes to fund programs and services. During the 1987-1988 fiscal year, the lates for which Census Nureau data is available, counties received 44% of their locally generated revenue from real property taxes.
According to the survey, 86.6% of counties reported that their tax base from property assessments had increased during the last three fiscal years, and 64.7% of those counties reported that the property tax base expansion had increased their tax rates.
"Thus, to increase revenues from property taxes, it seems that counties have been dependent on increased assessed property values, higher property tax rates, or both," the study says. "During the current recessionary economic state, where property values are depressed in most parts of the nation, few counties will enjoy an enhanced property tax base as a result of increased property values."
As creatures of state law, counties by and large have authority to do only what their states tell them they can do, and then only up to limits prescribed by law.
The report notes that all counties have authority to assess property taxes, 95.3% have authority to assess user fees, and 45.7% can charge impact fees. But only 39.7% can impose a general sales tax, and just 33.6% can levy selective sales taxes. A mere 8.6% have the power to collect income taxes.
Even those figures represent a step up for many counties. Close to 60% of all counties sought greater or new taxing authority during the past three years, and of those almost 66% were successful.
But efforts to further increase taxes could be thwarted by state laws. For example, 33.2% of the counties reporting the ability to levy a general sales tax already have reached the maximum level allowed by their respective states.
Counties, however, may be able to increase their take in the area of user fees.
Of the 95.3% of counties claiming to have authority to impose the fees, only 16.4% report being at the maximum level allowable. Consequently, "this revenue source may become a large portion of counties' revenue bases in the future," the report says.
The limited taxing power of counties gains particular poignancy when viewed against the legacy of the Reagan administration's program of fiscal federalism. Under the former President's policies, 73% of direct federal aid to counties as a percentage of total revenues was lost between 1980 and 1986, according to the Congressional Research Service.
At the same time, county growth and development mushroomed, placing enormous demands on county governments. Moreover, "counties have experienced a wave of federal and state mandates that are often unfunded," the report says.
Continued State Aid Unlikely
States have helped fill the gap to a slight extent. The General Accounting Office, in its 1990 report on federal, state, and local relations, said state aid to counties increased 15.5% between 1978 and 1986. Further increases, however, are unlikely because of the fiscal morass in which most states find themselves.
"Not only will states be financially incapable of helping the alleviate the fiscal problems of counties, but some states may have to reduce or defer financial assistance to local governments until they can mitigate their own budget deficits," the report says.
Earlier this year, Minnesota reduced financial aid to counties by more than $50 million, the report notes. And the Senate Budget Committee's analysis of President Bush's block grant proposal for 1992 concludes such practices are likely to become more common.
"Indeed, states may be under considerable pressure to use funds from the new block grant to offset their own budget deficits and not to pass through much needed revenues to local governments," the analysis says.
Against this backdrop of growing fiscal uncertainty, county governments are launching a two-pronged assault to seize greater control over their financial destinies: They are trying to increase sensitivity among state lawmakers about county revenue-raising constraints, and they are attacking unfunded federal mandates.
Jim Rout, a county commissioner from Shelby County, Tenn., and chairman of the association's tax and finance steering committee, is urging county officials to organize fiscal summits with their legislatures.
"State legislatures have been fairly receptive to permitting counties additional means of raising revenue," he said. But the uncertain economy and the increasing costs confronting counties make it necessary for state legislators to be more sensitive to county needs, he added.
Mr. Rout conceded that tax increases alone are not the answer. "If a county's economy is dwindling, a new sales tax is not going to help very much," he said.
On the mandate front, counties are taking a hard-line approach. Mr. Stewart, from Salt Lake County, said, "There must be no new unfunded mandates."
In addition to drawing a line on new requirements, county officials have drawn up a list of what they call 12 "repugnant" mandates the group is targeting for extinction.
The list includes a call to all federal agencies to develop a common definition for agricultural wetlands and to repeal the law that requires municipalities to rebate arbitrage earnings from tax-exempt bonds to the U.S. Treasury.
In the end, the continued viability of counties will depend in large part on their ability to raise money.
But because of their limited taxing authority, "it is expected that counties will also look at revenue sources other than taxs to expand their revenue bases," the report says. "Specifically, user fees and, to a lesser degree, impact fees, will be relied on more by counties to help fund services."
Of the nation's 425 counties with populations in excess of 100,000, 232 responded to the survey. The final report, likely to be available within several months, will encompass the remainder of the large counties, as well as data from the approximately 2,700 counties with populations under 100,000.