A Comparison of County Finances by Size Groupings

Introduction 

County offices annually go through the General Fund budget process and decide how limited funds will be allocated among numerous county services. Budgeting can be a stressful process and county officials often search for guidelines and information that is helpful to them. A common practice is to compare one county to other counties of similar size (in terms of population and/or taxable value). Revenue and expenditure data for each county in Oklahoma is published annually by the Oklahoma Cooperative Extension Service. These data allow one-to-one county comparisons. However, little information has been published that examines county revenues and expenditures by size groups. This report provides a stratification of county revenues and expenditures by two size variables: (1) population and (2) net assessed (taxable) value. This information will aid comparison and contrast of counties, especially at budget time.

 

Stratification or dividing the state’s counties into size groups is necessary because of the wide range of population sizes and the economic and geographic diversity encountered across Oklahoma. Stratification by (1) population and (2) net assessed value is reasonably accomplished for all but three counties. Tulsa, Oklahoma and Cleveland counties are by far the most populous and the wealthiest in terms of total assessed value. These distinctions make them unique in comparison to the other 74 counties. Because of the great difference that exists, this report excludes Tulsa, Oklahoma and Cleveland counties.

 

 

County Rankings 

Table 1 ranks the remaining 74 counties in order of increasing population size. The 2021 assessed value (2022 Fiscal Year) is also shown in the table along with assessed value per capita. Table 2 ranks these 74 counties in order of increasing assessed value. Each county’s population and assessed value per capita is also presented. It is interesting to compare a county’s place in Table 1 with its place in Table 2. For example, Harmon County has the next to smallest population (Table 1) and has the smallest net assessed value (Table 2). On the other hand, Cimarron County has the smallest population but is listed seventh in Table 2. One could surmise from this that Harmon County has a relatively small number of people and a relatively small tax base. Cimarron County has relatively few people but relatively more assessed value per person. Beaver County is even more pronounced in this regard. Beaver is ranked eighth smallest in population, but is ranked 35th in assessed value. Generally speaking, the greater the tax base (assessed value), the easier it is for county government services to be provided at adequate levels and quality to the citizens.

 

Since the ad valorem tax is so important in financing county government, counties with larger assessed valuations and valuation per capita can more easily finance county government services. Counties with smaller assessed values and smaller populations will tend to have a greater challenge in providing minimal levels of county services. Tables 3-6 support these findings.

 

All counties except Oklahoma, Tulsa and Cleveland Counties. These three are excluded because their sheer size skews the statistics presented in Tables 3-10.

 

 

 

*All Oklahoma Counties except Oklahoma, Tulsa and Cleveland

 

*All Oklahoma Counties except Oklahoma, Tulsa and Cleveland

 

*All Oklahoma Counties except Oklahoma, Tulsa and Cleveland

 

 

Stratification 

Stratification of counties was performed in such a way as to have several counties in each group and to make the groups cover a reasonably similar range of population or assessed value. Four population groups were selected: (1) Group I – populations up to 10,000; (2) Group II – populations of 10,000 to 20,000; (3) Group III – populations of 20,000 to 45,000; and, (4) Group IV – populations of 45,000 to 170,000. For assessed value, five groups were selected; (1) Group I – assessed values of up to $100 million; (2) Group II -$100 to $180 million; (3) Group III – assessed values $180 to $300 million; (4) Group IV -$300 to $500 million; and (5) Group V- $500 million to $2,000 million. Tables 3-10 show the average amounts of several revenue and expenditure categories for the 74 counties altogether and for each stratification grouping. Tables 3-4 contain the General Fund averages for all 74 counties and for each of the population groups. Tables 5-6 contain the General Fund averages for each of the assessed value groups. Tables 7-10 represent the Highway and Cash Fund averages for all 74 counties and for each population group. Tables 4, 6 and 10 provide per capita averages, while Table 8 provides per road mile averages.

 

 

General Fund by Population 

Average cash surplus (carry-over), revenue streams and expenditures for all 74 counties and for each of the four populations groups are shown in Table 3. Beginning cash surplus plus total revenue equals the total dollars available for financing county General Fund activities. This is labeled Total Revenue and Cash Balance in Table 3. End of Year Cash Surplus and population averages are also included. Notice that the average population of each group is roughly one-half of the next larger group.

 

It is important to note that Total Revenue and Total Revenue and Cash Balance do not necessarily represent all available dollars. Counties also have “surplus transferred from prior year,” consisting of cancelled warrants and liabilities. Counties do not usually budget these funds. Because surplus transferred from prior year is not included in the table, Total Revenue and Cash Balance minus Total Expenditures does not equal End-of-Year Cash Surplus. As expected, Table 3 shows that, generally, the larger the population of a county, the larger its county government is in terms of revenue and expenditures. Notice that the averages for Counties 74 (all 74 counties) are most similar to the averages in the 20,000 to 45,000 population group. For all groups, ad valorem revenues are clearly the greatest source of financing, varying from $1,162,087 for Group I to $6,612,600 for Group IV.

 

Expenditure patterns are quite consistent across population groups. For example, county sheriff expenditures are between 19.4% to 22.2% of expenditures for all four groups. General government (including maintenance and operation, insurance and employee benefits, and workers compensation) varies between 13.0% and 18.5%of expenditures. County sheriff and general government comprise almost half of general fund expenditures for the average county.

 

The importance of stratifying county government expenditures and revenues becomes clear when examining Table 4. Revenues and expenditures per person are significantly larger in the smaller counties, especially Group I. Contrast the revenues per person in all counties (Counties *74) with revenues per person in Group I. An average$229.89 in ad valorem taxes is paid by each person in counties with less than 10,000 people, versus an average $139.63 for all counties. An average $38.85 per person in county sales taxes are collected in Group I counties versus $22.91 per capita for all counties. Total revenue (largely taxes) per person in Group I ($389.69) is 69% more than the aggregate average ($231.07). The same is also true of total expenditures. These numbers suggest that either small counties collect and spend too much on county government or that there is a basic, fixed cost associated with providing a basic set of county services and small counties have fewer people to spread that cost among. Most likely, the latter explanation more truly describes the situation.

 

This phenomenon is called economies of size. Economies of size can be defined as a reduction in cost per person (average cost) because resources are used more intensively, that is, the same building, piece of office equipment, computer, and such can be used to serve more people. Another way of saying this is that a resource (such as a computer) is more fully utilized. Economies of size are exhibited in that the amount of additional resources necessary for each additional person is smaller. For example, one sheriff patrol car costing $55,000 might serve the needs of a 6,000 person county or the same car with just a little more maintenance might serve the needs of an 8,000 person county. Thus, the cost for the additional 2,000 people is much smaller per person.

 

 

General Fund by Assessed Value 

Average revenues and expenditures of the five assessed value groups show that the larger the county (in terms of assessed value), the larger the revenues and expenditures (Table 5).

 

Interestingly, in the detailed entries for total revenue, like ad valorem, county clerk fees, motor vehicle fees, and interests on investment, the larger the assessed value the larger the amount. But the sales tax receipts show a somewhat opposite trend. The higher the assessed value, the smaller the amount.

 

Looking at expenditures again, sheriff and general government are largest, but Other Expenditures are also relatively large. Sales tax accounts likely explain this. Sales tax accounts vary from county to county depending upon on votes of the people.

 

Table 6 shows per capita revenues and expenditures by assessed value group. We find much variation from group to group. Generally, Group IV is in sharp contrast to the other groups in per capita revenue.

 

Generally speaking, expenditures per capita increase from Group I to Group III but drop-off for Groups IV and V. Focusing on the Sheriff account, expenditures increase from Group I ($44.45) to Group III ($62.33) per capita. With a sharp decline in Group IV ($29.39), it increases somewhat for Group V ($34.82). Several other accounts have a similar sharp decline in Group IV from smaller to larger counties. This may indicate the economies of size mentioned earlier. Counties like Woods, Major, Dewey, Blaine, Beaver and Grant have smaller populations but relatively larger expenditures. As a result, the average per capita expenditures of Group I, II and III are higher than Group IV and V.

 

Finally, please note the change in Cash Surplus from beginning to end of year. Cash Surplus may better be labeled Cash Fund Balance. It is simply the amount of unencumbered money at a point in time. The change in cash balance is found by taking beginning cash, adding revenues then subtracting expenditures (including liabilities). The remainder is the ending cash balance. Average cash balances of each group tend to stay around the same level over time. This is expected.

 

 

Highway Fund by Road Miles 

Tables 7 and 8 represent the County Highway Fund Average Cash Balance, Revenues and Total Expenditure for 74 counties and by population group. While the General Fund and Cash Funds are presented showing averages per capita, the Highway Fund is presented as average dollars per road mile in Table 8.

 

At least two observations are made from the information in these tables. First, Group II seems to be at a relative disadvantage compared to the other three groups. Both the total revenue and the total expenditures are lower in Group II. The major recurring revenue sources – diesel, gasoline, special, motor vehicle license and registration taxes are all smallest (on average) in Group II. Smaller population (Group I) counties such as Alfalfa, Beaver, Cimarron,Ellis, Grant, Kiowa and Woods have relatively large oil and gas production. This boosts the average gross production tax revenue among the Group I counties. Second, Group II has (on average) only 856 county road miles whereas Groups I, III and IV (Table 8) all have over 1,100 on average. The number of road miles is a major factor in the allocation of diesel, gasoline and motor vehicle taxes. Population is another major factor, hence Groups III and IV get relatively larger shares of these taxes for this reason as well.

 

Table 8 indicates that total revenue per certified mile of county road varies from $3,935.24 in Group I to $6,731.56 in Group IV. The average is $4,970.87. Total expenditures vary from $3,218.47 in Group I to $5,907.64 in Group IV. Ending cash balance per mile appreciably increases from beginning to end of year.

 

*All Oklahoma Counties except Oklahoma, Tulsa and Cleveland

**Cash Fund Balance Transferred from Prior Years

 

*All Oklahoma Counties except Oklahoma, Tulsa and Cleveland

**Cash Fund Balance Transferred from Prior Years

 

 

Cash Funds by Population 

Average cash revenues and expenditures for all 74 counties and the four population groups are represented in Tables 9 and 10. When studying Table 9, it is apparent that average revenues and expenditures are directly correlated with population. Average Total Revenue ranges from $2,419,333 in Group I to $19,593,504 in Group IV, and total expenditures range from $2,683,450 in Group I to $13,902,569 in Group IV. All Others is quite large due to American Rescue Plan Act (ARPA), Use Tax Cash, Sales Tax Cash Jail Maintenance, Sales Tax Cash Roads and Bridges and Sales Tax Cash Rural Fire for the 2022 fiscal year.

 

Table 10 represents per capita group averages of revenues and expenditures by fund. This shows an inverse relationship to population. Group I has the largest total revenue and expenditures at $422.14 and $468.22 per capita, respectively,and Group IV has the lowest at $275.18 and $195.25, respectively. Sheriff Service Fee, County Bridge and Road Improvement and Resale Property are the dominant Cash Funds enumerated in the table.

 

*All Oklahoma Counties except Oklahoma, Tulsa and Cleveland

**All Others is quite large due to American Rescue Plan Act (ARPA), Use Tax Cash, Sales Tax Cash Jail Maintenance, Sales Tax Cash Roads & Bridges, and Sales Tax Cash Rural ire for 2022 fiscal year.

 

 

 

Summary and Conclusions 

In the current economic and institutional environment in Oklahoma, county government in smaller counties (in terms of population and taxable value) collect and expend significantly larger amounts per capita to finance county General Fund and cash fund activities. Larger counties seem to benefit from economies of size in the provision of county government services. Counties depend most heavily on ad valorem (property) and sales taxes. Citizens vote on local sales taxes so, it is assumed that they are willing to pay the price in order to maintain a certain set of county government services. Highway funding depends on formulas for allocation of state taxes and amounts per mile of road are similar across size groups, yet increase with increasing population.