Sales-tax wounds delivering a big hurt
Government’s work is just beginning when it comes to the financial planning for the coming months and future. Besides taking a toll on our personal lives, the coronavirus has created plenty of havoc in funding streams that are already impacting our towns, villages, schools and cities.
Erie County Comptroller Stefan Mychajliw was so startled by the sudden shift that he began sounding the alarms on major losses in the sales tax revenues for municipalities there in late March.
He makes a lot of sense. When businesses are forced to be shuttered, especially restaurants, malls and auto dealerships, that significant piece of the cash flow pie comes to a screeching halt.
“I have been providing updates to county legislators on a regular basis on what our losses could be, so that they can prepare for the worst,” Mychajliw said in a statement earlier this week.
“Having said that, I have called on our leaders in Washington to include federal aid to local governments in the next stimulus package to help offset the anticipated losses.”
By his estimates, Erie County — in a worst-case scenario of an 80% decrease — could be on track to lose nearly $128 million over a four-month period. That translates to more than 15% of the $829 million that county collected last year.
In terms of the consumer, the sales tax is just another burden we hardly notice when going to the store. However, it is impossible to miss when dining out at restaurants and making major purchases.
Going by Michajliw’s worst-case estimate of 80% in losses from March to June could impact chautauqua County by $15 million. According to its 2020 budget, legislators here approved a spending plan of $257 million. Revenues of $75 million — or 27 percent of the county budget — were projected from sales tax after a total of $71 million in 2019.
As of today, those estimates appear to be impossible to reach. Even if the economy does reopen late next month or early June, a lot of damage has been done.
To their credit, county legislators have discussed reining in costs during this month’s committee and Legislature meetings. Some reduction measures include no new equipment purchases while county department heads are re-examining budgets and being told to cut between 15% and 20%.
State Comptroller Thomas DiNapoli also has plenty of worries moving forward. Earlier this week, he said the current standstill could impact all entities for years to come.
“The ultimate price of the coronavirus remains undetermined. What is clear is that Washington must do more to help stabilize state and local government finances to avoid drastic cuts that would hurt hospitals, schools and vital services,” DiNapoli said in a news release. “The executive and Legislature passed a budget under very difficult circumstances to address our immediate needs, but we must be mindful of the bigger picture. Tax revenues will be substantially lower in the near term because of the pandemic, and likely well beyond. The state should minimize long-term costs from any new debt and commit to building up our rainy day reserves. The road ahead is a challenging one and will require a long-term strategy.”
Pains were already evident in the school aid totals for the next academic year. As this corner pointed out last week, most projections for all area districts were flat with very minor increases in state aid — the main engine of district budgets.
At this time, even with an approved plan in Albany, those figures are not guaranteed and could be reduced further. In January, state Gov. Andrew Cuomo said New York was facing a $6 billion budget deficit. That was two months before the coronavirus became a part of our everyday conversations. That gap — due to emergency funding — could be closer to $14 billion and growing.
Washington has been bailing out business, taxpayers and nonprofits to get through this mess that is not even two months old. Still, many citizens are struggling.
It can no longer be business as usual for governments — locally and worldwide. It is time to look for consolidations and efficiencies wherever possible.
A new reality has arrived. It is hitting each and every one of us in the pocketbook.
John D’Agostino is the OBSERVER publisher. Send comments to email@example.com or call 366-3000, ext. 401.