WASHINGTON — Identical bills introduced in the House and the Senate would make permanent the federal payments in lieu of taxes program, a key source of funds for counties and local governments.
Funding for the PILT program has expired and, without the federal payments, some counties could potentially default on their obligations or even file for bankruptcy, said Ryan Yates, associate legislative director for the National Association of Counties.
"This is absolutely one of NACo's top legislative priorities," he said.
The PILT program provides payments from the federal government to local governments to help offset the localities' losses in property tax revenues that occur because of the presence of federal lands in their jurisdictions. The Interior Department distributes the payments annually, in June, Yates said.
Local governments have to provide services to property owned by the federal government, even though the federal government does not pay property taxes, Yates said. In most states, the payments are given to counties, who treat the money as property-tax revenue and put it in their general funds to be used for any governmental purpose, he said.
PILT is a particularly important issue in the western United States, where there is a heavy amount of federal land ownership. For some counties, 15% to 20% of their budgets come from PILT, Yates said.
Without the payments, counties' services like police and fire could be hurt, NACo said in a news release. Some counties are already dealing with losses in jobs and property-tax revenues because of the financial crisis and they have limits on the amount by which they can raise taxes. Without the PILT funds, their credit ratings could be hurt and counties could be pushed over the edge, possibly having to file for bankruptcy, Yates said.
"There'd be no other option at that point," he said.
About 1,900 local governments were allocated a total of about $400 million in PILT payments in fiscal 2013. Since the program began, payments have been made to localities in every state except Rhode Island, as well as the District of Columbia, Puerto Rico, Guam and the U.S. Virgin Islands, according to the Interior Department.
The PILT program was established in 1976. In 2008 it became a program with mandatory funding that is not subject to annual appropriations.
But funding for the program expired at the end of fiscal 2013. Additional funding was not provided in the recently enacted appropriations law that provides more than $1 trillion in discretionary spending for fiscal 2014. The House Appropriations Committee summary of the legislation noted that the committee had been given assurances that other committees would promptly address PILT payments for fiscal 2014.
The House bill to permanently fund the program, H.R. 3879, was introduced by Rep. Ann Kirkpatrick, D-Ariz., and has been referred to the House Committee on Natural Resources. The Senate bill, S. 1913, was introduced by Sen. Mark Udall, D-Colo., has been referred to the Senate Committee on Energy and Natural Resources.
Additionally, congressional leadership has indicated that it wants to include funding for PILT in a final farm bill, which is currently being negotiated by House and Senate conferees. A bipartisan group of Senators, including Udall, wrote a letter to the conference committee leadership last week urging for PILT funding to be included in its final report. PILT funding in that bill could be just for fiscal 2014 or it could be for longer, Yates said.
"Congressional leaders are highly motivated to fund PILT," Yates said, and the farm bill could be a good vehicle to do that. But even if PILT funding is part of the farm bill, it is important to find a permanent funding solution for the program, he added.
"The PILT program is a critical piece of our county budgets, as most counties in my district and across Arizona include large amounts of federally owned land," Kirkpatrick said in a news release. PILT must be made permanent "to give our county governments the stability they need to plan and budget for each fiscal year. We must act now - we cannot burden our counties with financial uncertainty," she said.
