County Budget Will Be Hit Hard by COVID-19 Shutdown
2021 budget deficit could be $40 million or more.
Joe Lamers, director of the Milwaukee County Office of Performance, Strategy and Budget, told the Milwaukee County Board of Supervisors Thursday that the 2021 budget gap could be $40 million, or more.
Near the end of February, Lamers had prepared an annual report on budget projections for 2021. At that time, he was showing an estimated budget gap of $21 million. Since then, the COVID-19 pandemic and the economic shutdown that ensued have imperiled many of the revenue sources that make up the annual county budget.
Most at risk are sales tax revenues. They make up approximately seven percent total revenue, or approximately $82 million in 2020. Lamers estimates that sales tax revenues could be reduced by $17 million during the shutdown. Previous budget gap estimates were predicated on sales tax revenue increasing by $3.3 million compared to the 2020 budget.
Budget projections for sales tax revenue were put together looking at data from the 2008-2009 recession. “All economic indicators are suggesting that there’s going to be a steep recession… even after items like the stay at home order is lifted,” Lamers said. At that time, Milwaukee County saw a 12 percent dip in sales tax revenue translating to $10 million loss for the county.
While sales tax revenue is the portion of the county budget most at risk, the county’s budget is filled with revenue sources endangered by the pandemic’s effect on the economy.
Many departments of Milwaukee County rely on revenue generated from their operation. The parks department, zoo and the transit system are missing out on millions in revenue that they normally would generate on a monthly basis. These operations could potentially lose $18 million in revenue because of this.
Property tax revenues could be reduced by $6 million if property tax collections are affected by the crisis. There’s also legislation at the state level that would prohibit collection of delinquent property taxes. Lamers said an additional $2.3 million could be lost if this is passed.
The county also gets direct revenues annually from investments. And investments make up the majority of pension fund revenues. The market has seen a major decline during the pandemic. Lamers pointed to the 10-year treasury bill as an indicator, noting that it’s yield is below one percent for the first time in history. The decline in investment revenues is likely to be in the “multi-million dollar range,” he said.
State and federal revenues, which make up 28 percent of the budget are currently stable, Lamers said. But the state, which is budgeted to provide Milwaukee County with $278 million in 2020, is required to balance its budget. And it is currently seeing major losses in sales and income tax revenues. “So there’s some potential that they could come back and readjust county allocations,” Lamers said.
The pandemic may also contribute to nationwide spikes in healthcare costs and premiums, Lamers said. So, right now, the county is projected to lose about $6 million through increased healthcare costs.
At this point, Lamers said, the $21 million budget gap previously projected, is a “best case scenario.” It is likely that county supervisors and the incoming county executive will be trying this fall to balance a budget that is $40 million in the red.
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