How Much Do You Really Know??
The money in the Local Government Fund was established in 1934 and just like the State government, all local governments are being faced with budget hardships and townships are no exception. Townships provide basic services such as fire and emergency medical services, road maintenance, cemetery upkeep and recreational services to many citizens across Ohio. By reducing the LGF the state will jeopardize Ohio’s townships’ abilities to provide these basic and necessary services to their residents. A reduction will put a significant number of Ohioans’ health, safety, and welfare at risk. During a period when homeland security is one of the nation’s top priorities, it is the local governments’ responsibility to provide for and protect their residents. Reducing the LGF will hamper the ability of the local governments to adequately protect the community.
The money in the Local Government Fund each year is never a set amount. If the taxes collected by the state increase, the LGF increases. If the taxes collected by the state decrease, the LGF decreases. The proposed freeze eliminates the percentage formula and ultimately fixes funds for 2001 and 2002 to the amount dispensed in 2000. We are currently receiving CY 2002 LGF.
Current Ohio law states that 4.2% of the monies the state receives from sales and use, personal income, corporate franchise, and public utility taxes will be used to support the Local Government Fund.
Furthermore, townships have already lost revenue over the last five years. Townships do not have the ability to make up the lost revenue in other taxes. Municipalities have the ability to levy an income tax and counties have the ability to raise the sales tax. Inside millage is the only other constant revenue source for townships.
Township roads are not built to the same standard as city and state roads but townships have almost twice the miles of roads to maintain. Data on file with the Ohio Department of Transportation states that townships maintain 36% of the roads (40,668 miles) and 31% of the lane miles (75,119 miles) in Ohio. Yet townships receive only 5% of the motor vehicle fuel tax for a total of approximately $50,000 per township in CY 2001. A one-mile, two-lane road costs approximately $30,000 to pave with two inches of asphalt. The revenue each township receives from the motor vehicle fuel tax will only pave 1.6 miles of road. Current revenue combined with the proposed increase would allow a township to pave at least 3 miles of road.
I. Local Government Fund
- Composed of 4.2% of the revenue from state sales tax, use tax, personal income tax, public utility tax, and corporate franchise tax.
- If the taxes collected by the state decrease, the LGF decreases. Vice versa.
- State budget bill (House Bill 94) temporarily suspended the statutory allocation formula to counties and municipalities beginning with the July 2001 distributions.
- In CY 2001, $658.5 million was distributed to the 88 county undivided local government funds.
II. Local Governments
- There are approximately 2,367 political subdivisions receiving money from the undivided LGF.
- 1,309 Townships; 940 Municipalities; 88 Counties; and 30 Park Districts
- LGF money is second and third largest source of revenue for most political subdivisions.
- Governments can’t withstand a cut in or the removal of the LGF.
III. Reduced Services
- If the LGF is eliminated or reduced, townships will be forced to reduce basic safety services.
- Basic safety services include: police, fire, EMS
- In a time when unemployment is already high, townships will be forced to lay off employees due to lack of revenue to pay salaries.
- The elimination of the LGF would cripple, or worse, eliminate some townships in Ohio.
IV. No Outside Income Available to Townships
- Townships do not have the ability to make up the lost LGF revenue in other taxes.
- Cities have income tax and counties have sales tax.
- Inside millage is the only other constant revenue source for townships.
- Levies will need to be passed to provide additional revenue.
- In a time when it is increasingly difficult to pass levies, this could mean further financial troubles for townships.
V. State Is Not Fixing the Budget Problem
- As a means of fixing the budget crisis, the General Assembly, by reducing the LGF, is solving the monetary problems by shoving them onto the shoulders of the local governments.
- Local governments will not be able to provide services required through unfunded mandates thus requiring state assistance to fund programs.
VI. Townships Have Already Lost Revenue
- In 2000, the General Assembly passed legislation, which increased the exemption levels for which estates would be taxed in Ohio.
- Local governments received approximately $9 million less in estate tax revenue in 2001 due to the higher exemption levels.
- Motor vehicle fuel tax revenue receipts are lower due to additional groups receiving revenue off the top.
Request that no further reduction in the LGF be made to help offset the state’s budget deficit. Remind your legislators that local governments provide the necessary emergency services needed to protect and ensure the safety of all Ohio residents.