Feds Continue Compensation for Lost Local Tax Revenue

June 24, 2009

Stimulus dollars aren't the only big federal bucks being distributed to local governments these days.

The Dept. of Interior announced on June 11, 2009, its annual distribution of Payments in Lieu of Taxes (PILT). The money is intended to compensate to some degree for federal lands in each jurisdiction that may preclude typical development and its accompanying tax income.

The fiscal year 2009 allocation of $377.8 million is up about 4% from last year, and is being distributed to about 60% of the nation's counties and other local jurisdictions in 49 states, as well as Washington, D.C., Guam, Puerto Rico, and the Virgin Islands.

There is a large range in the amount of money each jurisdiction receives, ranging from a few hundred dollars to multiple millions. Each jurisdiction's allocation is based on a formula that takes into account the federal acreage, population, payments from certain other federal programs, and inflation. This year's formula tweaks led to a decrease in funding for 8 states and Puerto Rico (AL, KY, MD, MO, ND, NJ, PA, and RI).

The money is typically given to local government and district entities that address issues such as the environment, public safety, housing, social services, schools, and transportation, and which might have benefited from the lost taxes generated by other uses of the federal land. Many of these service providers have been hard hit by the recession, so the attention paid to this income source may be more appreciated this year, and warrant additional news coverage.

To find the county and state allocations, search:

The allocations for fiscal year 2008 and 2009 after Democrats won control of Congress, and the Presidency this year increased dramatically from the Bush years when the allocations ranged from about $199 million in FY 2001 to about $232 million in FY 2007. Those levels were in turn a sharp increase from the last years of the Clinton administration, which paid out $125 million in FY 1999 and $134 million in FY 2000.

The annual allocations, both now and in the past, raise a good opportunity to cover topics such as:

  • Local perceptions of whether this money does indeed compensate for taxes lost to federal lands
  • How this federal funding fits in with all other federal funding, including the latest salvo of Stimulus funding, that your local governments receive
  • How long it's been since local jurisdictions have revisited their own allocations to determine whether the most deserving or needy recipients are getting the money, and whether the relative distributions are appropriate
  • Whether the recipients are related to the types of federal lands that triggered the distribution. For instance, if wilderness lands are the source of the allocation incentive, are environmental protection efforts getting funding, or does the money go to build roads? Should there be a relationship between the land type and the recipient?
  • Whether the current federal allocation formula is appropriate, for the factors considered and the multipliers used.