As the Board of Supervisors prepares to pass an annual budget on Tuesday, county budget staffers are recommending delaying new spending and putting a hundred million dollars into reserve until they can get a handle on the COVID-19 pandemic’s budgetary impacts.
Supervisors could vote tomorrow to pass the budget as they began writing it before the viral outbreak closed schools, brought many businesses to a halt and sent people in isolation in their homes. But with much uncertainty still surrounding the pandemic—including how long it will last, and how deep its impacts to the economy—county budget officers don’t yet have a handle on what its effects will be on county revenues.
Some revenues, notes a report prepared for tomorrow’s meeting, will likely be stable. The county makes most of its money from real estate taxes, which stayed relatively stable during the Great Recession. But other revenues, such as sales and use taxes or fees at Parks and Recreation facilities, could drop precipitously.
County staff members are building preliminary projections around the most pessimistic of models laid out by Moody’s Analytics, a subsidiary of the credit ratings firm. That model assumes 13 percent peak unemployment, with full employment not returning until 2025; 9 million to 15 million infections in the U.S., peaking in June and abating in September; and no additional federal stimulus. It also assumes a 20 percent hospitalization rate for the virus and a 4.5 percent fatality rate, with less than half as many ICU beds as needed becoming available.
Moody’s own baseline scenario is less pessimistic, with 3 million to 8 million infections peaking in May, a 1.5 percent fatality rate, additional federal government action, and a 4 percent excess capacity of ICU beds. New infections are predicted to abate by July. Only in the very rosiest of projections will there be enough hospital beds, ICU beds, and ventilators available.
Putting $100 million into reserve would cover the expected budget gap that would result from an economic slowdown of that magnitude, plus a larger hit to real estate tax revenues, resulting in a $96 million shortfall in the budget.
It would also allow supervisors the pass the budget as written, rather than possibly restarting budget deliberations now.
That $100 million would be split between $40 million for the county government and $60 million for the schools, and would give supervisors the option to hold off on new spending until they know whether they’ll have the money for it.
The $40 million cut to the budget, if needed, would come from freezing new spending such as hiring, opening new facilities, and county employee raises. As the budget picture becomes clearer, those plans could move ahead as money is released from reserve.
The county also will not be issuing any new long-term debt until County Administrator Tim Hemstreet and his finance staff determine the market is right for it.
Supervisors are on track for a real estate tax rate $1.035 per $100 of assessed value, a penny cut from the current rate.
Supervisors will meet Tuesday, April 7 at 5 p.m. to consider those recommendations. During the COVID-19 state of emergency, they have begun holding meetings electronically; meetings can be viewed in-person or online at loudoun.gov/webcasts.