Local governments wait to see tax revenue losses
Click here to read the Policy Matters Ohio report discussing tax collection decreases and possible solutions.
Click here to read the pandemic unemployment guidelines.
WARREN — Warren and Trumbull County officials are uncertain how the COVID-19 pandemic will impact tax revenue collections, but they are certain it will.
Tax revenue of all types is expected to fall in the state and in local communities, according to Policy Matters Ohio.
“State and local tax collections from income and sales taxes are evaporating as needs soar. On April 6, the Ohio Office of Budget and Management reported the state’s total general revenue fund tax receipts were already falling last month, coming in at $159.4 million, 10.5 percent below estimates,” Wendy Patton, senior project manager for Policy Matters Ohio wrote in an April 8 report. “The economic crisis will immediately deplete state general revenues. Ohio’s biggest sources of tax collections are the personal income tax and the sales tax. In an economic downswing, as people earn less and buy less, state tax collections fall.”
Debbie Santangelo, Trumbull County’s deputy auditor, said the county typically receives sales tax payments two to three months after they are collected. The state collects the funds from sales and distributes a portion back to the county.
“In April, we are collecting money from February and in May we will be collecting the money from March. We won’t know how heavy this will hit until May or June, there are no figures yet,” Santangelo said, leaving the county “in the dark” when it comes to tax projections.
“We can’t even estimate what the loss will be,” Santangelo said.
While spending at places like grocery stores may have been up, spending at other establishments is sure to be down because of the state’s stay-at-home orders and the closure of nonessential businesses in an effort to reduce COVID-19 infections in the state.
Until the county can project how much its budget will suffer, it is difficult to determine if the county needs to lay off any workers, Richard Jackson, director of human resources for the county, said. He said the county is considering asking employees to be voluntarily furloughed, though.
“We have discussed this, but without knowing what the collections will be, it is difficult to know how much we need to cut,” Jackson said.
The county could tell some employees not to come in for two weeks without pay, but spread the impact out over the rest of the year so the employee doesn’t have to go a pay period without income. But the easiest way would be voluntary layoffs, Jackson said.
With the state offering about 50 percent of a person’s salary, on top of an extra $600 per month promised by the federal government, the county’s lowest paid employees could actually make more money on unemployment. Some older workers closer to retirement might be OK taking a pay cut on unemployment and getting the time off, Jackson said.
In the meantime, many county employees who can are doing their jobs from home and those who can’t work from home are rotating days in order to reduce the number of people in offices and comply with social distancing rules, Jackson said. The lobby of the county building still is open to disburse and collect paperwork that requires processing. Deputies are taking the temperatures of employees reporting for work every day, Jackson said.
County Commissioner Mauro Cantalamessa said there are still a lot of variables, and there is a chance the state or federal government could roll out a plan to replace lost revenues for local governments.
“Revenues were flat but remained steady leading up to the stay-at-home orders. The last few weeks, obviously, have been difficult for everyone, and I’m sure the numbers will bear that out. Right now, it is too early to tell because there are still too many variables — questions like: Will the state extend the order or add more restrictions? What type of assistance for recovery will be offered, if any, by the state or federal government to assist the local governments?” Cantalamessa said.
Commissioner Dan Polivka said the County Commissioner Association of Ohio has reached out to commissioners across the state and asked them to contact their Congress members to encourage them to pass a stimulus bill to help local governments.
Patton’s report in Policy Matters Ohio calls on state lawmakers to reconsider tax law, to reshift the tax burden in the state to tax wealthier Ohioans at a higher rate to reduce the impact on lower income people.
“Ohio policymakers must be prepared to rebalance our tax system and offset some of the decline in state revenues by restoring taxes on those who can afford it: the most affluent residents. Those who continue to earn such incomes through the downturn should pay more to help avoid draconian budget cuts,” Patton’s report states. “The epidemic is already causing fiscal distress and cutbacks. For example, the city of Cincinnati forecasts a budget deficit of $60 million to $80 million in 2020 due to the pandemic and announced layoffs of 20 percent of the city’s workforce: 1,700 people.”
Paired with a decline in well-paying middle class manufacturing jobs, $1 billion in state cuts to local governments in the last decade and the lackluster rebound from the last recession, local governments are in a bad position to weather an emergency like this, Patton’s report states.
In Warren, the city relies on income tax to generate most of the money for the general fund.
City Auditor Vince Flask said the city should know by the end of the week how the pandemic affected March collections, and by mid-May officials should know how it affected April collections.
“I am anxious; I want to know what to expect,” Flask said. “There is no doubt we will have to make cuts because it won’t just be tax collections that are down. The courts are collecting less money; fewer building permits are being pulled.”
The city is striving to reduce budgets by 20 percent, like the state, Flask said. Only essential spending is being approved right now, and Flask said he is going through the general fund to identify what can be cut.
“We are being as proactive as we can be; we are trying to plan for the worst and hoping for the best,” Flask said.