Bill to Strengthen Disparity Grant Program Moving in House

A bill to extend enhanced disparity grant funding for counties with proven local income tax effort is moving in the House of Delegates. Disparity grant funding provides much-needed revenues to counties with limited revenue generation potential to help fund necessary services such as public safety, schools, infrastructure, and community services.

MACo supports HB 737, which would extend enhanced state funding provided under the disparity grant program to jurisdictions with a local income tax rate of 3.2%. Under current law, the amount of funding received by county governments equals the lesser of the dollar amount necessary to raise the county’s per capita income tax revenues to 75% of the statewide average or the amount received under the cap provision. The current minimum grant amount is 67.5%.

The House Appropriations Committee amended the bill to repeal the sunset, instead of extending the funding until 2023, as was originally proposed. The bill was also amended to raise the cap from 67.5% to 80%.

From the MACo Testimony:

The disparity grant program promotes fiscal equity by providing noncategorical State aid to less affluent counties with proven local income tax effort. The program serves to ensure that counties, who rely on local income taxes for substantial revenue, are able to generate sufficient yield to fund education, public safety, roadway maintenance, and community services.

Recent years have seen State-imposed “caps” in this program that artificially lessen the effective revenue from such jurisdictions, including those who have exercised the maximum county income tax rate. Over the past five years, cap provisions have reduced State funding under the disparity grant program by approximately $233 million.

Stay tuned to Conduit Street for more information.

Follow MACo’s advocacy efforts during the 2020 legislative session on MACo’s Legislative Tracking Database.