by James A. Bacon
It is obvious to some people that COVID-19’s body blow to the economy will have a devastating impact on state/local government finances. Old Dominion University professors Ron Carlee and Robert McNab have estimated that local governments in Hampton Roads are losing at least $16 million a month in local taxes, while local governments across the state are losing $60 million monthly or more. And the blood-letting is getting worse.
Hotel occupancy and revenues were only 80% of normal levels in early March. By the end of the month, the estimate, revenues were running only 20%. Sales, business-license, hotel & motel, restaurant & food taxes comprise a “vulnerable” category of local government revenue amounting to $637 million in Hampton Roads and $2.9 billion statewide.
Unlike the federal government, the professors write, state and local governments must balance their budgets (unless, I might add, they engage in hidden deficit spending like running up unfunded pension liabilities and falling behind in building and infrastructure maintenance). “It’s not time to panic,” they write in the Richmond Times-Dispatch, “it’s time to prepare.”
Some local governments are acting proactively. Fairfax County and Chesterfield County are among those slashing budgets — including next year’s — in anticipation of declining revenues. Remarkably, Chesterfield is anticipating a decline in revenue sources funneled through the state even though Governor Northam and General Assembly budget writers have yet to re-work the budget passed earlier this year before the full dimensions of the COVID-19 crisis were apparent.
Chesterfield announced yesterday that it would furlough more than 500 part-time and full-time employees beginning Saturday, reports Richmond BizSense. Local officials said 40% of county revenues were tied to consumer behavior such as retail sales and travel. “Included in that percentage is the county’s dependence on state revenues which are tied to directly to employment and spending.”
“We’re trying to rebalance our proposed budget to what we think the next fiscal year’s going to bring us in revenues, and we’re trying to preserve our full-time workforce as much as possible, to be as productive as possible over the course of the next year,” said County Manager Joe Casey.
Likewise, Fairfax County is projecting significantly less revenue, driven by drops in sales tax collections, hotel stays, car tax collections, business taxes, and other areas, reports WTOP News. The county is expected to put off some or all of the new programs for schools, police body cameras, and affordable housing that had been proposed in an earlier presentation of the budget,
Said Board of Supervisors Chairman Jeff McKay: “The world has changed since that budget presentation, and so will our budget.”
Question: What the are Governor Northam and legislative leaders waiting for? Hopefully, we’ll see some action when the veto session begins in about three weeks.
