Assistance to Local Government
Local Government Revenues

Local revenues are expected to show moderating, albeit positive growth in 2008-09. Due to the termination of ERAF III payments in 2006-07, the share of the property tax going to local governments has increased to approximately 66 percent. Historically, property taxes have been a very stable source of revenue for local governments, and local government property tax revenues grew quite significantly beginning in 2000-01. Given the current conditions in the real estate market, however, property tax revenue growth is expected to moderate for the next several years, but positive year-to-year growth is anticipated for most areas of the state.


LOCAL GOVERNMENT REVENUE SOURCES
 The major sources of local government revenues are the property tax, the sales and use tax, the Vehicle License Fee, federal and state grants and subventions, and local taxes and fees.

Statewide property tax revenues are expected to increase 9.3 percent in 2007-08, and by 7.1 percent in 2008-09. The projected growth translates to an additional $3.4 billion for local governments in 2008-09, thereby increasing their total property tax revenues to approximately $32 billion. The moderating growth rate in 2008-09 is attributable to the decline in new and existing home sales in 2007, which could be as high as 40 percent when compared to 2006 sales volume. The decline in volume is tempered by retained growth in values that will impact the roll as properties are sold, and by moderate growth in new commercial construction. Because the roll for a fiscal year is determined by the values established on the preceding January 1 lien date (e.g. 2009-10 values are based on the January 1, 2009 lien date, which is based on 2008 market activity), the effects of reduced sales volumes and values on property tax receipts are lagged. Thus in 2009-10 we expect growth to be lower than 2008-09 as the market hits a low point in 2008.


PROPERTY TAX REVENUE GROWTH
 Property tax revenue growth is estimated at 9.3 percent in 2007-08, and 7.1 percent in 2008-09. This means an additional $3.4 billion for local governments in 2008-09.

The sales tax, local governments' other major source of discretionary revenue, also is expected to show modest growth in 2008-09. The sales tax should provide over $ 4.5 billion for discretionary purposes, in addition to $ 3 billion for public safety, $ 3 billion for health programs, and $1.5 billion for county transportation purposes. Vehicle license fees that provide partial funding for local health programs were up 2 percent in 2006-07 and are expected to show gains of 2.7 percent and 2.6 percent over the next two years.
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CHAPTER HIGHLIGHTS for Assistance to Local Government Back to Top

 Proposed Budget-Balancing Reductions
 State-Local Fiscal Relationship
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Budget Summary - Assistance to Local Government (pdf * - 42K) -
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