May 31, 2012
THE FINANCES OF JEFFERSON AND OTHER LARGE ALABAMA COUNTIES
A lot of attention has been given to Jefferson County’s finances since it filed for bankruptcy last
November. Unfortunately, some of the data needed to understand the County’s finances is not readily
accessible. As a result, the debate over solutions has been hampered by a lack of good information. The PARCA
staff offers the following basic financial comparisons of Alabama’s four largest counties, based on our
understanding of the relevant data.
Choosing the right data for comparisons. While meaningful information about county finances in
Alabama is hard to come by, there is no shortage of raw numbers. The key is to choose the right ones, and to
analyze them through “apples-to-apples” comparisons that get at the real issues in an objective way.
PARCA has analyzed local government finances in Alabama for 25 years, and we have found that actual,
audited revenues and expenditures are generally more relevant than budget numbers for understanding the
financial position of a unit of government. A budget is a plan or estimate, but it may not represent what actually
happens during the year. For example, the FY 20071 Jefferson County budget estimated that the General Fund
would receive $356 million in revenues; however, the audit report shows that the General Fund actually took in
only $263 million that year. Obviously the actual FY 2007 figure would be more accurate than the budget as a
baseline for describing the trend of County finances in the years that have followed.
We also have found that using General Fund data alone is often a poor way to measure a government’s
finances. The reason is that governments normally operate out of several fund accounts, not just one. For
example, two of the big financial issues facing Jefferson County are the servicing of its debt and the cost of
operating its charity hospital. Neither of these occurs in the General Fund; both are carried in separate fund
accounts. In fact, the most recent audit showed that 45% of the County’s governmental expenditures were
made outside the General Fund. As this indicates, using a General Fund comparison alone can be very
misleading. It goes without saying that comparing one county’s general fund finances with another county’s
total governmental finances is an “apples-to-oranges” mistake that can produce erroneous conclusions.
For these reasons we have chosen to compare revenues in the general fund, earmarked funds, and total
governmental funds.2 Comparisons of this type can be developed from the tables in official audit reports, which
follow standard formats. They give us the best “apples-to-apples” comparisons on which to base our analysis.
Comparing Jefferson County to its peers. Alabama’s four largest counties – Jefferson, Madison, Mobile,
and Montgomery – are natural peers for comparison purposes, and the best financial measures to use are their
most recent audits. We have analyzed the FY 2010 governmental revenues on a per-capita basis, using data
compiled mainly from external audits and 2010 Census populations. To create “apples-to-apples” comparisons,
we added into the data separately reported tax support for the Jefferson County Health Department and for the
University of South Alabama Hospital and Health Department in Mobile County. On the other hand, we
excluded Jefferson County’s Limited Obligation School Fund, which is a large and unique application of the
power counties have to levy sales taxes for educational purposes, as well as education appropriations in the
other three counties. We also removed $50 million of one-time payments that Jefferson County received from
debt-related litigation, bringing its miscellaneous revenues more in line with historical levels. With these
adjustments, we have tried to eliminate artificial differences among the counties. Here’s what we found:
1
Fiscal years (FY) for Alabama counties run from October 1 to September 30.
“Governmental” funds include the General Fund and other fund accounts that are earmarked for special revenue
sources, debt service, and capital outlays. All four of Alabama’s largest counties, for example, have funds to account for
building and road finances. Business-type (i.e., “proprietary”) activities of government – such as sewer, water, and landfill
operations – are excluded from these comparisons. Thus, our comparisons omit Jefferson County’s Sanitary Fund.
2
PUBLIC AFFAIRS RESEARCH COUNCIL OF ALABAMA
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May 31, 2012
KEY FINDINGS
1. In FY 2010, Jefferson County had the highest general and governmental revenues per capita among
Alabama’s four largest counties. Its revenues were much higher than those in Montgomery and Madison
counties, and its General Fund revenues were substantially above those in Mobile County.
2. General Fund trend data indicate that this has been the normal situation.
3. With loss of the occupational tax, Jefferson County would drop below Mobile County but overall
would remain comparable to the three peer counties in revenue availability.
1. Jefferson County’s FY 2010 governmental revenues per capita were higher than those of the other
three large Alabama counties.
Table 1 below compares governmental revenues for these four counties in the general fund, earmarked
funds, and in total. Jefferson County’s General Fund revenues were $377 per capita, while Mobile’s were $288,
Montgomery’s $258, and Madison’s $146. Among all governmental funds, Jefferson ranked first at $567 per
capita while Mobile was at $544, Montgomery at $345, and Madison at $266. Jefferson County was 30% higher
than second-ranking Mobile County in the General Fund and 4% higher in all governmental funds; its revenue
margin over Montgomery and Madison counties was far larger in both the general and governmental funds.
TABLE 1. COMPARISON OF FY 2010 GOVERNMENTAL REVENUES FOR ALABAMA'S LARGEST COUNTIES
Jefferson County
Dollars
Census Population
General Fund
Mobile County
Per Capita
Dollars
Montgomery County
Per Capita
658,466
Dollars
Madison County
Per Capita
412,992
Dollars
Per Capita
229,363
334,811
$247,933,000
$377
$118,946,576
$288
$59,272,475
$258
$48,844,171
$146
125,563,052
191
105,817,376
256
19,771,129
86
40,099,073
120
All Governmental Funds $373,496,052
$567
$224,763,952
$544
$79,043,604
$345
$88,943,244
$266
Earmarked Funds
Sources: PARCA analysis of FY 2010 audit reports, with adjustments for health and education revenues; Census population data.
2. General Fund trend data indicate
that Jefferson County typically has had higher
revenues per capita than its peer counties.
Chart 1 shows that, with the
adjustments, Jefferson County’s FY 2010
revenues as shown in Table 1 are consistent
with recent history. (The dip in FY 2009 was
caused by the escrowing of occupational tax
collections for part of the year in response to
court decisions.) Mobile County data also are
consistent over time, with adjustment for a
large one-time receipt in FY 2009. This
indicates that Jefferson County typically has
had higher revenues per capita than its peers.
PUBLIC AFFAIRS RESEARCH COUNCIL OF ALABAMA
C hart 1. General Fund R ev enues for J effers on and Mobile C ounties
(Sourc e: Audits for the v arious y ears , w ith Adjus tments )
Jefferson
Mobile
$300,000,000
$250,000,000
$200,000,000
$150,000,000
$100,000,000
$50,000,000
*Adjusted
$0
FY 2007
FY 2008
FY 2009*
FY 2010*
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May 31, 2012
3. With the loss of the occupational tax, Jefferson County would drop below Mobile County but
overall would remain comparable to the three peer counties in revenue availability.
Jefferson County’s Budget Management Office estimates that General Fund revenue would drop to $178
million in the current fiscal year without the occupational tax and the large one-time, lawsuit-related payments
that have cushioned County finances in recent years. The impact of these reductions can be shown by
substituting this estimate in the General Fund line of the table.
Table 2 adjusts Jefferson County’s General Fund revenues down to $178 million, to show the impact of
the revenue losses. General Fund revenues drop to $270 per capita, 6% below Mobile County but still above
Montgomery County and far above Madison County. Governmental revenues drop to $462 per capita, 15%
below Mobile County’s $544 but substantially higher than Montgomery and Madison County. Thus, without the
occupational tax, Jefferson County would drop below Mobile County in revenues per capita, yet remain well
above Montgomery and Madison counties. Put another way: even without the occupational tax, Jefferson
County’s general and governmental revenues would remain comparable to the revenues available to other large
Alabama counties.
TABLE 2. COMPARISON OF FY 2010 GOVERNMENTAL REVENUES FOR ALABAMA'S LARGEST COUNTIES,
ADJUSTED FOR THE LOSS OF JEFFERSON COUNTY'S OCCUPATIONAL TAX
Jefferson County,
ADJUSTED
Dollars
Per Capita
Census Population
General Fund
Mobile County
Dollars
658,466
Montgomery County
Per Capita
Dollars
412,992
Per Capita
Madison County
Dollars
229,363
Per Capita
334,811
$178,000,000
$270
$118,946,576
$288
$59,272,475
$258
$48,844,171
$146
125,912,052
191
105,817,376
256
19,771,129
86
40,099,073
120
All Governmental Funds $303,912,052
$462
$224,763,952
$544
$79,043,604
$345
$88,943,244
$266
Earmarked Funds
Sources: PARCA analysis of FY 2010 audit reports, with adjustments for health and education revenues; Census population data.
These findings are far different from those of another recent analysis, which projected that, without a
replacement tax, Jefferson County revenues would fall below Mobile County by $173 per capita and below
Madison County by $87 per capita.3
We conclude that far too many factual issues remain unresolved (indeed, unanalyzed) in the debate
over Jefferson County finances. There is much to be learned, and many plans to be made, before we can expect
the County to emerge from bankruptcy.
Understanding the basic facts about how Jefferson County’s revenues compare with peer counties is a
necessary first step, but only the beginning, of these analyses. What do the revenue comparisons with peer
counties suggest about the adequacy of Jefferson County’s revenues? Where do we need more money, and
where better management of the money we have?
3
A recent Birmingham News article (“Budget cuts must pare additional millions with occupational tax defeat,” May 20,
2012) compared FY 2012 budgeted revenues for Jefferson, Mobile, and Madison counties. The article mistakenly included
revenues from all funds for Mobile and Madison counties, while comparing them to an adjusted version of General Fund
revenues for Jefferson County. No adjustments were made to improve comparability. Discussion of trends was based on
FY 2007 budget estimates rather than on actual revenues. The conclusion, that without an additional tax Jefferson County
would have far lower revenues per capita in future years than the other two counties, was based on an “apples-to-oranges”
comparison.
PUBLIC AFFAIRS RESEARCH COUNCIL OF ALABAMA
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May 31, 2012
Has anyone looked at how the peer counties conduct business in the various functions that are common
to county governments, to see if there are practices worth copying?
For example, Jefferson County hired a consulting firm at considerable expense to evaluate its
operations. Months ago, the consultant pointed to two key issues – serious deficiencies in accounting, financial
controls, and financial management; and reform of the indigent care system to improve its cost-effectiveness
and quality of care. Are there processes in place to search for best practices and develop plans that would
resolve these issues?
Jefferson County invests about $77 million a year of earmarked revenues and General Fund subsidies in
its health and indigent care operations, which include Cooper Green Mercy Hospital and the County Health
Department. This amounts to $117 per capita. Mobile County invests about $21 million of earmarked and
general revenues in its health and indigent care operations, which include the University of South Alabama
Hospital and the County Health Department. This amounts to $52 per capita – less than half the Jefferson
County investment. Is the Mobile system more cost-effective, or merely cheaper?
Answers to questions such as these are urgently needed.
PUBLIC AFFAIRS RESEARCH COUNCIL OF ALABAMA
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