The financial impact of the new coronavirus on local governments likely won’t be fully understood for possibly another month or two. But officials say they are trying to prepare for the worst. In Longview, this could even mean a 5% cut across all departments.
Longview City Manager Kurt Sacha stressed Thursday that cuts aren’t happening now. But he has asked each department to look at what a 5% cut would mean if the city does have to adjust its budget.
“Two weeks ago we were all thinking things were still going great and the recession was out there in the future somewhere,” Sacha said Thursday. “Obviously that’s changed dramatically in the last two weeks. As a matter of fact, it’s gone 180 degrees.”
If it comes to a 5% cut, Sacha said it would “most assuredly” include personnel cuts. The city’s general fund is about $40 million. A 5% cut would be $2 million.
“You don’t make up $2 million in papers, pencils and conferences,” said Sacha, who also served as Longview’s finance director for 20 years.
In a worst-case scenario, Cowlitz County government could face a 14% reduction in sales tax revenue this year, County Financial Director Kurt Williams said. Without making any cuts, the county could end the year with half the budget reserve it began the year with — from $16 million down to $8 million.
But the worst-case scenario could be dramatically different even a month from now, Williams said.
“This is kind of uncharted territory,” he said. “The previous recession was really severe, but it didn’t have the government shutting down businesses and saying send your people home. ... Until we get into it in a couple months, there’s really no way to have an idea of where it might go.”
Statewide business closures and government shutdowns are expected to significantly reduce the revenue to cities and counties from sales, property and business and operation taxes, as well as permitting to a lesser extent.
However, sales tax revenue reports run 60 days behind. This means the local area won’t know the full impact of March closures until May.
At that point, local governments should have a good idea of whether the pandemic is continuing or if it’s dropping off and, if so, how rapidly the economy might rebound, Sacha said.
When asked if he felt optimistic about the economy being on the rebound at that point, Sacha said he was 51-49.
“I’m hopeful that would be the case, but my feeling is that’s not necessarily what might happen — that the economy rebounds quickly,” he said. “I heard some unemployment numbers yesterday that were pretty staggering.”
A record 3.3 million people nationwide filed for unemployment last week, according to the Labor Department. The previous record was 695,000 in October 1982.
“Even locally, if you get in your car and drive around, you can see there’s nothing happening,” Sacha said.
Andy Hamilton, Kelso’s city manager, said it’s likely the latest recession began a couple weeks ago. With business closures, Hamilton said it’s also likely the city will see reduced revenue. But he was reluctant to predict.
If this recession is anything like the 2008-09 turndown, that may mean layoffs, Hamilton said. For now, the city may hold off hiring new people. And Kelso will wait to see if Gov. Jay Inslee expands his two-week shutdown.
“I’ve been in tornadoes,” Hamilton said. “I got evacuated from a hurricane, but nothing like this. Nobody really has. There’s never been anything viral like this that slowed everything down to a halt.”
The $2 trillion stimulus package passed by the U.S. Senate Wednesday includes $150 billion for local, state and tribal governments that face decreased revenue related to COVID-19. The measure now is in the U.S. House.
Sacha said he’d like to see those additional funds put towards federal grants for operational costs for police and fire.
“These are like stories I used to hear from my grandparents during the war or something,” he said of the impacts of the new coronavirus.
In anticipation of a possible recession, the county has been examining each new position as it comes open to see if it really needs to be filled, Williams said. And last week, county commissioners approved a furlough program for employees to take time off while still receiving health benefits, which saves the county money on their salaries.
“We just have to be very conscious of what it is we’re spending and looking for where we can save because we don’t know what the full impact will be but we think it could be significant,” Williams said.
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