Income tax estimates from state for Monroe County, Bloomington 2021 budgets: Up 9.3 percent compared to last year

Tuesday’s news from Indiana’s state budget agency (SBA) can be analyzed by local governments in Monroe County  as at least OK.

The SBA’s estimated distribution of local income tax revenue to Monroe County governments is about 9.3 percent higher for 2021 than it was for 2020.

That’s not a complete surprise. A big impact from the COVID-19 pandemic on income tax revenues to Indiana local governments is not expected to be felt until 2022. That’s when distributions of local income taxes (LITs) will be based on the tax collected on income earned in the pandemic year of 2020.

Still, in late summer this year, local governments were drawing up initial budgets for 2021 with some caution baked in. Even though the 2021 LIT distributions are based on taxes collected on income earned in 2019, there was some concern that the ability of wage earners to pay those taxes this year might have been be affected by the COVID-19 pandemic. That concern looks like it has been somewhat relieved by Tuesday’s estimates from the SBA.

But based on the SBA estimates, the increased amount of revenues that Bloomington can likely factor into its 2021 plans will not be enough to tip the balance from a deficit budget to one where revenues exceed expenses.

Responding to a query from The Square Beacon, city communications director Yael Ksander said that “[T]he allocation for the City would still not equal the amount of deficit spending the 2021 budget proposes.”

Planned expenditures won’t be affected by Tuesday’s SBA estimates, Ksander said. “The 2021 expenditure budget will not be revised in light of these new estimates. This additional revenue would simply diminish the level of deficit spending.” Less deficit spending means the city will won’t have to tap as much in reserves as it had planned.

Tuesday’s SBA release of estimated distributions came later this year than it usually does. Due to the COVID-19 pandemic, the deadline for the SBA to release estimates for all 92 counties in the state was relaxed from Aug. 2 to Sept. 15—through an executive order of Indiana governor Eric Holcomb.

News from the SBA came the day before Bloomington’s city council is set to vote on a quarter-point increase to the countywide income tax. If on Wednesday the city council votes by a 9-0 or an 8–1 majority to enact the increase, that will mean Monroe County residents will start paying the higher rate on Jan. 1, 2021. Annually, the higher rate would generate an extra $4 million for Bloomington and another $4 million for Monroe County, and the county’s two towns.

Even if the expenditure side of the ledger in the city of Bloomington’s 2021 budget won’t be affected by the SBA’s Tuesday figures, the revenues will change some, compared to the proposal that was presented to the city council in late August.

Assumed in Bloomington mayor John Hamilton’s 2021 budget proposal was $12,141,498 in local income tax revenue from distributive shares. The figure could be analyzed as conservative, because it’s a smidgen less than the actual distribution of $12,238,460 in 2019 and a little more than the budgeted number of $11,827,433 for 2020.

How much is the SBA now estimating Bloomington will receive in 2021? SBA’s estimates don’t include a breakdown by governmental unit.

But starting with the SBA’s Tuesday estimates of $35,876,828 in certified shares for all units of government in Monroe County in 2021, and applying the same relative percentages from 2020, would make Bloomington’s piece of the certified-share pie $13,616,057 (38.09 percent of $35,876,828).

That translates into $1,474,559 more general fund revenue for 2021 than Bloomington’s proposed budget included. It’s less than the transfer from the rainy day fund that makes the 2021 budget balance, which is proposed at $2 million. The total proposed budget revenue for the 2021 general fund is $47,441,607.

The public safety local income tax (PS-LIT) committee was even more conservative than the city of Bloomington in its approach to 2021 budgeting.

The committee assumed revenue from PS-LIT in 2021 to be just 90 percent of 2020’s revenue. That meant the working revenue budget for the committee’s deliberations in August was $7,789,211.

Tuesday’s SBA estimate of PS-LIT revenue to all of Monroe County is $9,459,193. Subtracting the dispatch center’s $2,247,490 allocation this year leaves $7,211,703.

The PS-LIT committee recommended against allocating $353,700 that had been requested by rural fire departments. That means the estimated $7,211,703 will be divided among Bloomington, Monroe County, and the towns of Ellettsville and Stinesville. The formula for dividing up the money is based on property tax footprint.

Based on last year’s relative percentages, Bloomington’s part of the $7,211,70 in PS-LIT distributive shares would work out to $3,691,362. The figure that’s slotted into Bloomington’s proposed 2021 budget is $3,072,414, or about $600,000 less.

Bloomington’s city council is scheduled to receive a final budget proposal on Sept. 30, with a vote to adopt it set for Oct. 14

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