July is the month when a lot of the groundwork is laid for local governments putting together budgets for the next fiscal year.
The county budget, which runs concurrent with the calendar year, January through December, has to be in place in September. As you might imagine, this year’s budget sessions present unique challenges.
“The year 2020, in the 22 years I’ve been on the court is unlike one I’ve never seen before,” County Judge Wade McKinney said.
An early event with an effect on this year’s budget cycle came when the Texas Comptroller’s Property Tax Assistance Division required the Henderson County Appraisal District to increase property values by 10 to 12%.
The certified values are due from Chief Appraiser Bill Jackson July 25.
McKinney said the county will stay within the 3.5% revenue increase window allowed by Senate Bill 2, which took effect last year. If the county sets a higher rate, it triggers a roll-back election. Senate Bill 2 is known as the Texas Property Tax Reform and Transparency Act. There is a caveat in the legislation allows an increase of up to 8% in the time of a disaster declared by the Governor of Texas or the President.
McKinney said this year, although the property tax revenue figures to be higher, that will be offset somewhat by a reduction of revenue from other sources. He expects a drop in the amount the county gets for housing out-of-county prisoners. A stream of prisoners the county has housed for Rockwall County will be ending when it opens its new jail facility. Also, a reduction in interest rates will have an impact on income.
“Interest rates have been lowered drastically,” he said. “That in itself will be a $500,000 loss to the county.”
McKinney said in the past, even in a budget crunch, the county has been able to avoid rate increases.
“About two years ago, we even set the rate below the effective rate,” he said.
In each budget year, the effective rate is the rate that would raise the same revenue as the previous year.
McKinney said the state’s chief aim in setting property tax rules is providing money for public education.
“When you get a tax statement, I believe 64% is school taxes,” he said. “County government is 18%. Most counties collect for all of those entities, so when you get your tax bill, it has Henderson County across the letterhead. Once collected, the money is dispersed to all of the taxing entities the Tax Office serves.”
Taxes aren’t the only source of county income structure.
“The county runs off of ad-valorem tax, fee money and miscellaneous incomes,” he said. “Those miscellaneous incomes bear a good portion of the burden when you’re looking at a tax revenue of about $24 million with a $42 million budget.”
McKinney said he remembers the economic downturn that began in 2009, didn’t hit the county hard until the 2011 budget was prepared the following summer. The county was faced with a $1.3 million shortfall. The remedy was severe budget cuts that even cost some employees their jobs.
“What we’re trying to do this time, is learn from that experience and mitigate the losses starting now, so it doesn’t hit us all at once.” he said.
McKinney’s proposed budget is to be filed with the county clerk on July 30. Commissioners Court will begin going over the proposal in August.