WASHINGTON — Counties are facing a “triple threat” of tax reform, entitlement reform and sequestration, National Association of Counties Executive Director Matthew Chase said at a briefing on Capitol Hill Tuesday.
“We have a lot at stake in the budget conference committee,” Chase said. He said he hopes that counties see stability as a result of the negotiations over the federal budget, since cuts in federal appropriations have significantly affected state and local governments.
NACo is working to preserve the tax exemption for municipal bonds and is preparing for tax reform, whenever legislation actually moves forward.
“Our attitude is, whether it comes up in the next couple of weeks or it comes up next year, we want to be ready,” Chase said. As long as the Congressional Budget Office says that changing the tax-exemption for munis will generate a significant amount of revenue, the option will be on the table, he added.
Michael May, a supervisor on the Prince William County, Va. Board of County Supervisors, described how changes to the tax-exemption for munis would hurt his county, which is located in the Washington, D.C. suburbs.
To keep up with the county’s growing population, the county needs to develop infrastructure, and it relies a lot on bond financing to do so, he said. The county’s triple-A rating allows it to build projects at lower costs than if its ratings were lower.
But if munis became less attractive to investors because of tax reform, the county might have to raise interest rates to draw investors to its bonds. As a result, “the savings that you would achieve from that triple-A bond ratings is essentially not what it would have been,” May said.
In addition to working to preserve the tax-exemption for munis, NACo also wants to make sure that people will still be able to deduct their local property taxes on their federal tax filings, Chase said.
On entitlement reform, NACo opposes block grants for Medicaid that would cap how much the federal government spends on the program regardless of how much it costs. Chase said that when the federal government caps its spending, states shift costs to counties.
The congressionally mandated, across-the-board spending cuts known as sequestration have resulted in cuts to programs like the Community Development Block Grant Program, Chase said. The program is used for affordable housing, social services and economic development.
NACo is also working to get more flexibility from federal agencies, because some regulations are hurting them. Chase said that NACo supports the congressional water resources bills, which streamlines projects.
But NACo is concerned about the reauthorization of the Moving Ahead for Progress in the 21st Century Act, or MAP-21 — the federal transportation funding act that expires on Sept. 30, 2014, he said.
“We want to continue to see federal, state and local partnership and corroboration on infrastructure,” he said.
NACo also wants the House to pass the Marketplace Fairness Act, which would give states the authority to collect sales taxes from internet purchases, Chase said. The Senate passed its version of the bill in the Spring.
But Chase said that “we’re not here to whine about more money.” Instead, NACo wants to make sure that there’s a dialogue between all levels of government and that decisions made by Congress affect state and local governments.