The economic fallout of the coronavirus pandemic is already having a major impact on state and city budgets. In Missouri, state officials passed a budget that relies heavily on federal funding from the coronavirus relief package.
In Johnson County, Kansas, commissioners have proposed significant budget cuts and furloughed hundreds of employees in anticipation of reduced revenues.
But in Kansas City, Missouri, the city council passed a $1.7 billion budget at the end of March based on revenue projections from before the pandemic. Aside from a temporary hiring freeze, the city hasn’t made any significant cuts or furloughed any employees.
In fact, the council has recently approved several new major expenditures, including spending $72 million on the state-owned Buck O’Neil Bridge and issuing millions of dollars in debt for a new youth soccer complex in the Northland.
The city’s finance, governance and public safety committee on Wednesday got a look at what a worst-case budget scenario might look like, including potential furloughs and across-the-board reductions to make up for economic losses caused by the pandemic.
Still, councilmembers held off on taking any action.
Councilwoman Heather Hall said she wants to see what revenues look like in May, and whether any federal funding will come directly to Kansas City.
“I think we don’t know enough yet to determine what a plan of furloughs might be because we don’t know… what the county’s plans are on giving us CARES Act dollars [federal coronavirus relief funds]. We also don’t know exactly what next month looks like, because no one’s done this before,” she said.
Members of the city finance department on Wednesday presented a scenario that assumed the economic impact of the pandemic would be identical to that of the 2008 financial crisis.
Under that scenario, the city would have to save nearly $300 million over six years to maintain some reserves in the general fund. That’s more than double the amount the finance department said the city would need to save under a less severe scenario presented back in March.
The earlier report was based on a one-year drop in revenues in sales, convention, and earnings taxes, followed by a quick recovery. The newer report is based on a longer period of decline and a longer recovery.
The possible savings presented by the more dire scenario would include cutting 500 jobs, furloughing city employees and freezing employee pay.
In the short term, a two-week furlough of city employees, including police and firefighters, would save about $13 million dollars this year.
Exempting police and fire from furloughs would mean other city employees could face up to six weeks of unpaid furloughs.
While the finance department said the reality would likely fall somewhere between a short recession and the worst-case scenario, councilwoman Katheryn Shields worried the reality might be even worse.
“I think we should at least act on the scenario that’s been presented in terms of what happened in 2008, 2009, 2010," she said.
But Kansas City budget officer Scott Huizenga said early indications suggest the impact – at least on the current fiscal year – won’t be as severe.
So far, earnings tax revenues are down only half as much as previously estimated and withholding taxes are actually up. Huizenga said sales tax revenues for the end of the fiscal year came in within .1% of the original budget projection and while convention and tourism collections tanked in March, the impact was only down about 7% for the year.
Huizenga said Kansas City is helped by the fact that the fiscal year ended in April, before the major effects of the pandemic were felt. He also said Kansas City is less impacted than other municipalities because it only relies on sales taxes for about a quarter of its budget.
