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Every year our faculty offers more than 200 courses and webinars, responds to thousands of phone calls and emails on routine and urgent matters, and publishes approximately 50 books, manuals, articles, and reports—all to support our state’s cities, counties, judicial officials, state public officials, and citizens in understanding and improving state and local government.

The increasing complexity of challenges facing North Carolina creates a greater demand for faculty expertise from the School of Government. Your gift today helps ensure the School of Government will have the resources to continue to provide timely non-partisan training, advice, and expertise that addresses the growing challenges facing North Carolina.

Please consider making a gift to support the School today, on UNC’s annual day of giving. Your gift is an investment in North Carolina’s public officials and communities.

Thank you,

Aimee N. Wall

Dean, UNC School of Government

Sales Taxes from Non-Residents

By Sophia Trentacosta and Whitney Afonso


Have you ever wondered how much of your sales tax base is from non-residents?  Well, in my new article my co-author and I explore just that question.  We examine the average contribution to the sales tax base (not revenues) from a single in-commuter, a one-night stay of a tourist, and a college student.  We do not find much evidence that college students meaningfully contribute to the sales tax base, but we find that an in-commuter has an average monthly contribution to the sales tax base of just over $1,000.  Similarly, a hotel night stay, our proxy for tourism, is $525.  Does this mean that every in-commuter or tourist is contributing that much or that little?  Nope, that is just the average.  So, look at how many commuters you have, how many tourists and think about if you think they spend about the same as the average or a bit more or a bit less.  This will allow you to have a decent estimate of how much of your sales tax base is paid by these two major sources of non-resident sales tax revenues!  (See the full article here.)

Following summary by Sophia Trentacosta


In North Carolina, urbanism greatly impacts counties’ revenue raising capacities through sales taxes. While previous studies on sales tax exportation focus on the presence or absence of regional retail centers and highways, this blog addresses the impact of a variety of non-resident populations in North Carolina. Afonso and Moulton’s (2024) article, published in the journal of Public Budgeting & Finance, uses the onset of the COVID-19 pandemic as a natural experiment in order to understand the impacts of commuters, tourists, and college students on a county’s tax base.


Understanding this tax base composition can pose substantial benefits for budget practitioners. For instance, according to a study from the Urban Affairs Review, exporting tax burdens impacts residents’ levels of support for local governments (Martin, Lopez, and Olsen 2019). Since a voter referendum is required to levy local sales taxes, it is important for practitioners to consider who bears tax burdens. Additionally, studies have shown that having diverse revenue sources can lead to greater levels of stability among local governments. Understanding the economic impacts of commuters, tourists, and college students on sales tax bases can thus guide practitioners as they make decisions related to financial management.


Before diving into the study’s methods and findings, it is important to understand the state of sales taxes in North Carolina. There are 100 counties within the state, all of which levy at between a 2% and 2.75% local rate. The similarity in sales tax rates across counties thus makes North Carolina a particularly strong setting for this analysis. Furthermore, there are no municipal or special district local sales taxes, and counties’ sales tax base is set by the state government through the General Assembly. This lack of variation in sales tax rates creates a relatively stable fiscal environment ideal for a research analysis. Finally, the large presence of tourism, commuting, colleges and universities, and urbanism makes North Carolina an ideal setting to study the specific impacts of non-residents on counties’ sales tax base.

This study uses the economic shock of the COVID-19 pandemic in order to study the impact of non-residents. The pandemic reached North Carolina in March 2020, and a statewide stay-at-home order was passed. As a result, many commuters began teleworking, tourism came to a halt, and college students were sent home. Since this stay-at-home order applied to all counties and populations throughout North Carolina, the onset of the pandemic served as the comparison point for this study. With the pandemic-induced absence of commuters, tourists, and college students, sales tax revenues from March and April of 2020 were compared to forecasted sales. This comparison allowed for the impact of non-residents on counties’ sales tax revenues to be isolated.


This natural experiment revealed that the loss of in-commuters and tourists throughout North Carolina’s 100 contributed to significant declines in taxable sales. More specifically, the loss of one in-commuter resulted in a reduction in taxable sales by $1,079. Conversely, gaining one out-commuter resulted in an increase of $542. To measure the impact of tourists, one hotel room vacancy was used as a proxy for the taxable sales of a single visitor. A hotel room vacancy at the beginning of the pandemic resulted in a $525 decrease in taxable sales. The impact of college students, however, is less clear. Unlike commuters and tourists, college students were not found to be significant contributors to sales tax bases outside of their county of residence. This could be due to: the presence of on-campus meal plans, students continuing to live in-county after moving off-campus, and/or the possibility that college students may not be an important component of the sales tax base.


These results allow practitioners and researchers to understand both the tax mix and rate setting of different jurisdictions. The determination of specific monetary contributions also helps practitioners and researchers determine the extent to which residents bear the tax burden which can impact levels of support for local governments. Furthermore, exporting this tax burden to commuters, tourists, and college students also lowers the cost of government and increases the demand for government services. Future research could focus on the impact of these tax exportations on the expenditures of local governments.


Citation to journal article:

Afonso, Whitney B., and Jeremy G. Moulton. “Local sales tax exportation: The impact of commuters, tourists, and college students on the tax base.” Public Budgeting & Finance (2024).


Other articles mentioned: 

Martin, Isaac William, Jane Lilly Lopez, and Lauren Olsen. 2019. “Policy Design and the Politics of City Revenue: Evidence from California Municipal Ballot Measures.” Urban Affairs Review 55, no. 5: 1312–38.


Citizen Engagement Tools: Online Budget Simulations

Blog post by Whitney Afonso, Zach Mohr, and Scott Powell

Questions for Practitioners:

  • When (as in time of year) should you engage citizens in budget simulations?
  • Can I expect trust in our government to increase if we engage citizens in budget simulations?
  • How do starting budget conditions affect revenue and expenditure preferences, and what role do deficits, surpluses, and balanced conditions play in shaping these preferences?
  • In what ways can local government practitioners enhance the design of budget simulations based on the findings, and what considerations should they take into account when implementing such simulations to engage citizens in the budget process?



In the rapidly evolving landscape of budget engagement, online budget simulations have gained prominence. This blog addresses the increasing use of these simulations, particularly in local governments, and emphasizes the need for a thoughtful evaluation of design choices. While previous studies focused on federal budgets, this blog delves into municipal budget simulations, posing the question: does beginning the simulation in balance, deficit, or surplus affect respondents’ engagement and budget preferences?

The blog post summarizes an article published in the journal Public Budgeting & Finance.  We also discuss findings that were not presented in the article that suggests that starting the simulations in deficit really does not affect trust. The blog is useful to anyone that is looking to think more deeply about how to set up an online budget simulation.  They may also be useful to those that want to do experiments in budget and finance settings, which have some important practical challenges.

The findings from the research are highly relevant to local government budget practitioners who wish to engage citizen to participate in the budget process. As budgeting preferences are shown to be a function of design, budgeteers should think critically about the design of their simulations.  Specifically, we think that starting from a small budget deficit position, such as the level of inflation, may be the best way to practically get more engagement with the budget simulation, but this may influence the budget outcomes from the simulation.  At any rate, a choice on how to start the simulation must be made.

Summary of the Article

While traditional in-person engagement has been the norm, the shift to online methods, accelerated by the COVID-19 pandemic, brings benefits such as broad accessibility to the simulation and speed to complete them (although this may also be a bit of a problem).  The article first traces the evolution of online budget simulations from national to local levels, emphasizing their growth in popularity and recognition as a best practice in public engagement, with examples of awards received by local governments. The newer “dynamic” simulations, allowing simultaneous adjustments to revenue and expenditures, are highlighted for their widespread adoption and relevance for both local governments and scholars interested in testing budget engagement theories.

Behavioral Model and Hypotheses

In the article, we discuss the impact of information presentation in budget simulations on participant engagement and budgetary preferences. Referring to previous studies, we establish that the way information is presented, especially concerning cost and performance, influences budget preferences. The model proposed suggests that starting a simulation with different budgetary conditions affects participant engagement and preferences. Unlike prior assumptions of intrinsic motivation, this research explores how the simulation structure influences engagement levels, potentially influencing other perceptions like trust in the government, which we discuss more below.

Research Design and Analysis

Participants engaged in the simulation as part of an online survey experiment. The study aimed to understand how starting conditions (balanced, a 5% deficit, or a 5% surplus) influenced participant engagement, preferences, and perceptions.

Due to local leaders’ concerns about public perception, the simulation had to be conducted in a controlled lab environment rather than in the field. This field-in-lab experiment involved randomly assigning participants to different budgetary conditions, mirroring those of a nearby local government. The participants were younger and more diverse than the general population, being students from the university, thus the specific policy preferences indicated in the simulation are not generalizable to the population.

The analysis focused on three main aspects: level of engagement, budgetary preferences, and final budgetary balance. Contrary to expectations, the time spent on the simulation did not significantly differ between deficit, surplus, and balanced conditions. However, the deficit treatment significantly reduced the number of participants completing the simulation, indicating potential difficulties. The deficit treatment increased the number of changes made to both expenditures and revenues, while the surplus treatment primarily influenced changes in revenues.

Starting conditions significantly affected both revenues and expenditures. Participants tended to maintain taxes when starting in balance, reduce them in surplus, and either maintain or increase them in deficit. Expenditure changes were idiosyncratic, with deficits leading to more significant cuts.

The results partially supported hypotheses related to the size of changes and the final budgetary balance. Participants starting in deficit made larger changes to expenditures, but the final balance was only significantly influenced by the surplus condition, aligning with anchoring and status quo bias. The study sheds light on how starting conditions in budget simulations impact participant behavior, providing valuable insights for both academic research and practical applications in local government budget engagement.


The experiment demonstrates that different starting conditions significantly impact engagement and budgetary preferences. Two out of three engagement outcomes were influenced by starting conditions, indicating their substantial role in shaping participant behavior. The deficit condition particularly amplified cuts to services like the police, suggesting that unpopular services might be more vulnerable during financial downturns. Despite the expected increase in time spent on the simulation due to varied starting conditions, time was not significantly affected, potentially influenced by the participants’ choice to avoid difficult tasks.

The deficit condition reduced the likelihood of participants completing the simulation, highlighting cognitive limitations and avoidance of challenging situations. This finding has practical implications for practitioners, emphasizing the trade-off between obtaining more information through deficit starting conditions and the decrease in completions. Future research could explore predictors of completion, such as math literacy, to enhance engagement. Additionally, practitioners may need to consider when to run simulations, as participants’ responses could vary depending on the budget preparation cycle.

Observations of “chunking” behavior in deficit conditions, where participants made larger changes, suggest a dynamic relationship between engagement and budgetary preferences. The study encourages further behavioral theory development in the context of budget simulations.

The research contributes to understanding individual psychological processes like anchoring, loss aversion, and decisional inertia in budget engagement, offering insights for practitioners on designing effective simulations. Practical implications include adjusting starting conditions based on desired outcomes and considering the impact of performance information on budget engagement. The study advocates for more field experiments and “field-in-lab” experiments to refine the choice architecture of politically sensitive topics like budget simulations, enhancing the usability and effectiveness of engagement efforts. Overall, the findings underscore the importance of behaviorally informed changes in shaping public engagement and preferences in budget-related decision-making.

The Simulation’s Effect on Trust

One of the things that was particularly important to our local government partner that we were helping to test the effect of starting position was to make sure that this did not have an effect on citizen’s trust.  The city had carefully maintained its well earned reputation for being a good steward of taxpayers money and it did not want to see that reputation tarnished because citizens’ were asked to do a budget simulation that started in deficit.  This was a major reason that we ran the simulation on students where we could properly debrief them that the scenario was not real and we took out all mentions to this specific city in the simulation.

We also saw that it was an opportunity to test the effect of the simulation and the simulation starting position on the outcome of trust in local government.  So, we actually designed an experiment within the experiment that would look at the effect of seeing no simulation relative to seeing a simulation.  We also are able to see if the effect of the treatment of balance, deficit, and surplus had an effect on trust.  So, the experiment participants were first given a series of demographic questions and a question about trust in different levels in government, they were then randomly assigned into one of the four treatments shown in figure 1 and were asked to complete the simulation, and then the participants were asked about their level of trust in government again.  So, this can be treated as either a between subject or pre-post design.

Figure 1: The four treatment conditions


It really doesn’t matter, though, how we analyze the data because there was no statistically significant effect of the simulation on trust.  There was likewise no effect between the different starting treatments on the levels of trust between the treatments or the change in the trust.  Put simply, starting a budget in deficit is not going to influence the level of trust – at least as we measured it.  One of the things that we are doing with future surveys is looking at whether the simulations had effects on other perceptions about the government.


The results of the published study and the results that we are presenting here suggest that there are only minimal negative effects of starting a budget in deficit.  Most importantly it may modestly reduce the number of completions.  However, starting the budget simulation in a small deficit – such as the current rate of inflation – may lead the respondents that complete the budget to adjust more types of revenue and expenditure and provide budgeteers with more realistic information about how citizens would balance the budget.  Starting the budget simulation in deficit is also found not to reduce trust.  Future research is ongoing about the responses to different levels of deficit (2.5%, 5%, 7.5% or 10%) and effects on other perceptual outcomes.  We would invite the budget community to propose other types of experiments that they would like to see researchers address and the research community should continue to work with local governments to test their most promising behavioral changes to these simulations.


Citation to journal article:

Mohr, Zach, and Whitney Afonso. “Budget starting position matters: A “field‐in‐lab” experiment testing simulation engagement and budgetary preferences.” Public Budgeting & Finance (2023).

Five Criteria to Consider When Thinking About Taxes

Taxes are a necessary aspect of any modern society, as they provide the government with the resources needed to provide public goods and services such as infrastructure, healthcare, education, and security. However, not all taxes are created equal, and policymakers must take into account various criteria when designing and implementing tax policies. In this blog post, we will discuss five tax criteria: economic efficiency, equity, adequacy, feasibility, and transparency.

The Millennial Guide to Doing Your Taxes

  1. Economic Efficiency: Economic efficiency refers to the ability of taxes to raise revenue with minimal distortion to economic behavior. Taxes can create economic distortions by altering the incentives of taxpayers, which can lead to changes in their behavior. For example, high taxes on labor income may discourage people from working, while taxes on capital may discourage investment. A tax system that minimizes these distortions is considered economically efficient. Policymakers can achieve economic efficiency by designing taxes that are broad-based, have low rates, and minimize exemptions.
  2. Equity: Equity refers to the fairness of the tax system. One way a tax system is considered fair when taxpayers are required to contribute to the cost of public goods and services according to their ability to pay. The ability to pay is usually determined by income or wealth. A progressive tax system, where the effective tax rate increases as income or wealth increases, or a proportional tax system, where the effective tax rate is the same across income groups, is typically considered more equitable than a regressive tax system, where the tax rate decreases as income or wealth increases. Policymakers can achieve equity by designing taxes that are progressive or proportional, provide targeted tax credits or deductions to low-income households, and eliminate tax loopholes that benefit only segments of the population.  A second way to consider equity is through the benefit principle, where a tax (or fee) structure is designed to target those who benefit from a service at a higher level than those who do not (at least directly).  Policymakers can achieve this form of equity by designing taxes (and fee) structures where the consumption of the service or good is linked to the use of it.  This is justification for many taxes and fees like a fuel tax which finances roads and highways.
  3. Adequacy: Adequacy refers to the ability of taxes to raise enough revenue to fund public goods and services. Policymakers must ensure that the tax system is capable of generating sufficient revenue to meet the government’s spending obligations. Adequate taxes can help maintain public confidence in the government’s ability to provide essential services, promote economic stability, and reduce the risk of fiscal crises. Policymakers can achieve adequacy by designing taxes that are broad-based, have moderate rates, and are regularly adjusted to reflect changes in the economy.
  4. Feasibility: Feasibility refers to the ease of administering and enforcing the tax system. A tax system that is too complex or difficult to enforce can result in high compliance costs, tax evasion, and reduced revenue. Policymakers must consider the administrative and enforcement costs of implementing tax policies when designing the tax system. Simplicity and clarity can improve the feasibility of the tax system. Policymakers can achieve feasibility by designing taxes that are easy to understand, have simple compliance requirements, and use modern technology to improve administration and enforcement.
  5. Transparency: Transparency refers to the openness and accessibility of tax information. A transparent tax system provides taxpayers with clear and understandable information about the tax policies, tax rates, and tax revenues. Transparency can help promote public trust in the tax system, reduce tax evasion, and increase compliance. Policymakers can achieve transparency by providing clear and accessible tax information, engaging in public consultations when designing tax policies, and publishing regular reports on tax revenues and expenditures.

Tax IRS Cartoon 32

In conclusion, tax policies play a vital role in any modern society. Policymakers must consider various criteria, including economic efficiency, equity, adequacy, feasibility, and transparency when designing and implementing tax policies. By incorporating these criteria into tax policies, policymakers can create a fair, efficient, and effective tax system that promotes economic growth, social justice, and public trust.

Citizen Engagement: Active Participation

Local governments in North Carolina are required to engage citizens in their budget process by following the guidelines set forth by the Local Government Budget and Fiscal Control Act. This act requires that local governments provide opportunities for public input and involvement throughout the budget process, including public hearings, workshops, and other forums for community feedback. The local government must also make the budget and related documents available to the public for review and provide a written summary of the proposed budget. Furthermore, the budget must be advertised in the local newspaper, and the public must be given an opportunity to comment on the budget before it is adopted.

In addition to these legal requirements, many local governments in North Carolina have taken further steps to engage citizens in the budget process. For example, some governments hold community meetings or town hall events specifically to discuss the budget and gather feedback from citizens. Others may use social media platforms or online surveys to reach a wider audience and gather input from those who cannot attend in-person meetings. By involving citizens in the budget process, local governments can ensure that the budget reflects the needs and priorities of the community and fosters a sense of transparency and accountability.  In previous posts (for example: here, here, and here), I have discussed citizen engagement in the budgeting process.  In general, these discussions go well beyond what is required by the state in terms of citizen engagement.  In this post, I will discuss the third and final “phase”, active participation.   Active participation is achieved when government and citizens collaborate on a set of policy issues and citizens are actively able to shape policy and outcomes.

Governments, especially local governments, around the world are increasingly turning to active participation methods like participatory budgeting (including Greensboro and Durham) and citizen advisory boards to engage with citizens and foster greater public participation in decision-making processes. These methods are designed to ensure that the voices of all citizens are heard, and that governments are accountable to the communities they serve. In this blog post, we’ll explore the benefits and concerns of these methods, as well as best practices for their implementation.

What is PB? - Participatory Budgeting Project

Benefits of Active Participation Methods

Active participation methods like participatory budgeting and citizen advisory boards have several benefits. First, they promote greater transparency and accountability in government decision-making. By involving citizens directly in the decision-making process, governments can demonstrate that they are responsive to the needs of the communities they serve.

Second, these methods can help to build stronger communities by fostering greater civic engagement and participation. When citizens feel that their voices are being heard and that they have a say in how their tax dollars are being spent, they are more likely to be invested in the success of their communities.

Third, active participation methods can help to identify and address issues that may not be immediately apparent to government officials. By involving citizens directly in the decision-making process, governments can gain a better understanding of the needs and priorities of their communities, and develop more effective policies and programs as a result.

Rainy Day Bus Riding Survival Guide

Concerns and Drawbacks

Despite the many benefits of active participation methods, there are also some concerns and drawbacks to consider. One concern is that these methods can be time-consuming and resource-intensive. Participatory budgeting, for example, requires significant staff time and resources to manage the process and ensure that it is fair and transparent.

Another concern is that these methods may not always be representative of the broader community. For example, citizen advisory boards may be dominated by certain interest groups or demographics, which can skew the priorities and perspectives represented in the decision-making process.

Finally, there may be concerns about the efficacy of these methods. While participatory budgeting and citizen advisory boards can help to identify community needs and priorities, they may not always result in the most effective policies or programs. Additionally, there may be questions about whether the decisions made through these methods are binding or simply advisory.

How to Do a Cost-Benefit Analysis for Important Decisions - Lucrum Consulting, Inc.

Best Practices for Implementation

To ensure the success of active participation methods, governments should follow best practices for implementation. These include:

  • Clearly define the goals and objectives of the process. Governments should be clear about what they hope to achieve through participatory budgeting or citizen advisory boards, and ensure that these goals are aligned with broader policy objectives.
    • This includes not asking for feedback and input that your jurisdiction does not have a plan for using and/or acting on.
  • Develop a transparent and inclusive process. Governments should develop a process that is transparent, fair, and inclusive, and ensure that all citizens have an equal opportunity to participate.
    • This often means having several avenues for citizens to participate.
  • Provide adequate resources and support. Governments should provide adequate resources and support to ensure that the process is well-managed and that citizens have the information and tools they need to participate effectively.
  • Incorporate feedback and evaluation. Governments should incorporate feedback and evaluation into the process, and use this feedback to refine and improve the process over time.


Active participation methods like participatory budgeting and citizen advisory boards are powerful tools for engaging citizens and fostering greater public participation in decision-making processes. These methods have many benefits, including greater transparency, accountability, and civic engagement. However, there are also concerns and drawbacks to consider, including resource constraints, representativeness, and efficacy. By following best practices for implementation, governments can ensure that these methods are successful in promoting greater public participation and achieving policy objectives.

ARP Accounting and Financial Reporting in North Carolina

Accounting and financial reporting guidance for American Rescue Plan monies seems to be a never-ending soap opera with constant twists and turns.  While there is extensive GAAP-guidance for government mandated nonexchange transactions related to asset, liability, revenue, and expense/expenditure recognition, it has proven more challenging to readily fit all the square evolving ARP guidelines and options into the GAAP round holes.  This blogpost focuses on asset, liability, revenue and expense/expenditure recognition guidelines for the various ways that ARP funds may be received, managed, and expended.

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One Working Capital Management Strategic Tool: Interfund Transfers

By Michelle Lofton and Mikhail Ivonchyk

Working capital management is a managerial strategy that monitors and uses current assets (e.g., cash, accounts receivable, and inventory) and current liabilities (e.g., accounts payable and notes payable) to ensure smooth operations. The purpose is to maintain cash flows for liquidity to meet short-term operating expenses and obligations. This integral part of sound financial management uses a variety of strategic tools to manage cash flows. These can include the use of unrestricted cash, savings, interfund borrowing, interfund transfers, delaying payments, receivables, a line of credit, direct lending arraignments, and short-term debt. Yet, little academic research on governments has evaluated the process for selecting different tools, the policies governments have in place to implement them, and the consequences of using one tool over another.

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GiveUNC 2022


When Dean Mike Smith asked me to join the UNC School of Government Foundation Board in 2014, I was honored to have the opportunity to work in support of an institution that has done so much for my home state of North Carolina. I also feel fortunate, however, to have had the opportunity to do this work alongside Mike.

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In this post I will be answering some common questions regarding the Certified Local Government Budget Officers Program or CLGBO.  To be clear this is what had been referred to as the CBEO (Certified Budget and Evaluation Officers) Program.

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So, Your Jurisdiction is Thinking of Starting a Revenue Manual…

Consulting and updating your revenue manual is the first step of the administrative process for revenue forecasting.  At least, that is what I say when I teach revenue forecasting.  Of course, when I then turn to the course participants and ask how many of them have revenue manuals in their jurisdiction only one or two raise their hands.  In fact, there are some years when no one raises their hand.

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