As the state makes tax cuts and budget cuts, those cuts trickle down to the local level. Local officials are becoming concerned because what happens in Topeka affects them here in Newton and Harvey County. In this installment we look at how state cuts have impacted the budgets of Newton and Harvey County.
By James Jordan
One of the largest tax cuts in state history was passed last year by the state legislature. Those cuts inevitably have an impact on school and local government. It is no surprise local government officials around the state are concerned about the latest round of cuts. Local officials say they have worked hard to tighten their belts and do more with less money, but also say they have cut as far as they can without cutting essential services. There have been several state cuts over the past 10 years that have impacted local government. The state used to have a thing called "demand transfers," which was sort of a revenue sharing system. The state sent cities and counties money to help keep property taxes down. The demand transfers were taken away by the state in 2001. The city of Newton used to get $130,000 annually, according to assistant city manager Lunda Asmani. Had that fund continued, it would have been around $200,000 for the 2013 budget year. Also related, Asmani said, is interest earned by the city. In 2007 the city earned $400,000 in interest income, and expects to earn about $8,000 in 2013. Asmani said that is largely due to the faltering economy and much lower interest rates, but the loss of demand transfers is also a factor as the city has had to use its reserve funds more. Asmani estimated the city of Newton has $690,000 less than it would have had if not for the loss of demand transfers and interest income. The city has used reserve funds some, "but you can only use your reserve funds so long," he said. Harvey County assistant administrator for finance Anthony Swartzendruber said the loss of the demand transfers was one of the biggest things that has hit the county from the state. That cost the county around $500,000. In 2006 the state did away with sales tax on business machinery, and that had some effect on Newton and Harvey County. However it was not as great of an impact as it was in more industrial areas. For the county the loss of revenues from that sales tax exemption was about $100,000 per year. The loss was a little less than that for the city of Newton. Harvey County Administrator John Waltner said the state promised to give the cities and counties money to make up for that lost revenue. The first installment came in 2008 but the state then stopped making that payment. One thing that helped the city and county was a half-cent sales tax that voters passed in 2006. That made up for state cuts to some extent, but the general population picked up the tab through paying the sales tax. That allowed the city of Newton to cut its mil levy, or tax rate, on its residents. That tax rate stayed steady until last year when there was an increase. Sales taxes have become a big part of budgets for cities and counties. There was a move in the last legislative session to eliminate sales tax on groceries, and that would have had a negative impact on local governments. That proposal did not pass. Cities and counties are also exempt from paying sales tax. There is talk about taking that exemption away. Asmani said that would cost the city between $250,000 and $300,000 per year if they had to start paying sales tax on things they buy. With all these cuts it is understandable that local officials would be wary of more cuts coming from the state. Waltner said it is "murky" right now as to what is going to happen in the coming year. "We will have to wait and see what the affects of the tax cuts are. We anticipate it will be a challenge."