For the first time in years, Local Option Sales Tax (LOST) money is not increasing in Tifton; indeed, the opposite is happening. In addition, revenue known as pro-rata, which is “unidentifiable sales and tax proceeds” distributed by the state revenue department, has stopped completely. Why?
Basically, the state DOR collects all sales taxes and remits them back to local governments based upon a “magic” formula that few are privy to see. DOR receives as payment for this service one percent of what they collect, which approximates roughly $40 million/year from cities.
There are also funds the DOR receives they don’t know where it should be remitted. These amounts are placed into an “overflow” fund. Every six months, DOR would send back to the county where the funds came from these monies which would be up distributed among municipalities and school systems according to a pre-arranged distribution plan. That law went into effect in 1997 and had a 10-year sunset provision.
Well, the sun has set. The General Assembly didn’t pass the extension of the distribution process of these unidentifiable sales taxes, so now the state keeps all the “moo-la”. This amount averages about $42 million a year that the state can now claim. That was $42 million that local voters approved to go to their schools, roads and infrastructure and to roll back property taxes (LOST and HOST). Now, the state gets to spend it at its discretion.
Sen. Chip Rogers has a study committee looking at privatizing the collection of these funds. Alabama employs this system and collections went up when they did so because of increased accountability. Meanwhile, in Georgia, municipalities suffer due to the lack of foresight of the General Assembly.
[UPDATE 30 July 2008]: It’s been confirmed that the DOR 1% admin fee generated $48 million in FY08, based on a total of $4.8 billion in total local sales tax collections. In calendar year 2007 there were $40 million in unidentifiable sales tax proceeds. Of that amount, $18 million was distributed to local gvts.