COVID-19 Could Cost County $450 Million

The cost of COVID-19 for Milwaukee County could end up being as high as $450 million.

The costs and lost revenues for Milwaukee County associated with the pandemic continue to pile up. Look ahead and add to that the costs that will come from re-opening and recovery and you get the $450 million, according to County Executive David Crowley’s office.

In early April, the outgoing administration of Chris Abele put together a report showing that lost revenue from the shutdown could balloon the county’s 2021 budget deficit from $21 million to $40 million. The latest projections indicate the shutdown has now blown a hole in the current 2020 budget anywhere between $5 million and $34 million. And, it is expected that the 2021 budget process will begin with a $40 million budget deficit.

Crowley said that costs directly related to COVID-19 have reached $40 million for the county.

The Office of the Comptroller and the Office of Performance, Strategy and Budget (PSB) both produced reports this week that show the county has taken a major hit in revenue. Looking at all of 2020, the report from PSB estimates that the county will lose $105 million in revenue budgeted for 2020.

Revenue earned in parks and at the Milwaukee County Zoo have been integral to funding those county operations. “But if we can’t open the beer gardens this summer we can’t get the revenue,” said Crowley.

Recently, in order to mitigate declining revenues, the county has implemented freezes on things like hiring, contracts, overtime and travel. And currently, approximately 774 county employees have been furloughed. Lamers told supervisors that it’s likely the number of furloughs will increase to more than 1,000.

Unfortunately, these “tough decisions” won’t be enough, Crowley said at a media briefing Wednesday. “We’ll have to cut more because it’s not sustainable.” In a statement released Thursday evening, Crowley called upon state and federal officials to supply Milwaukee County with additional resources to offset the cost of the pandemic to the county. Much of the current federal funding can be used to cover costs related to the pandemic, but not to supplant lost revenues.

The board passed a resolution Thursday calling on the federal government to issue a $500 billion aid package to cities and counties around the country. Board Chairwoman Marcelia Nicholson said in a statement, “We are facing a massive budget gap next year as a result of the coronavirus. Without additional support from the federal government, we will not be able to adequately fund essential public services.”

Employee compensation is one among many, according to the PSB report, of potential areas for savings where Milwaukee County can offset the loss in revenue. In fact, the PSB report indicates the county could potentially offset all $105 million in lost revenue. That being said, even after generating all those savings, Milwaukee would still have a budget deficit of $5.4 million to overcome for 2021, said Joe Lamers, PSB director.

The comptroller’s report did not explore the fiscal potential of the cost savings measures the PSB report did. The independent comptroller looked at what the budget could look like simply based upon the current bottom line of county departments. Its analysis showed that the county could finish the fiscal year with a $34 million budget deficit.

Several county departments are currently running large deficits. Milwaukee County Parks is showing a $4.1 million deficit. The annual parks budget is highly dependent on revenue and fees that it has been unable to collect during the pandemic. Another is the House of Correction (HOC), which is running a $4.3 million deficit. The HOC would normally be collecting revenue from municipalities for housing individuals for them. And the zoo, another county entity highly dependent on the revenue it generates, is running a $5.6 million deficit.

On top of department deficit, declines in major sources of countywide revenue are blowing a hole in the budget. It is estimated that there will be an $8 million to $9 million loss in property tax revenue according to PSB and the comptroller’s office.

But, “sales tax is really the wild card here,” because the county won’t know the true impact of the pandemic until mid-summer because of the delay in receipt of sales tax collections, said CJ Pahl, financial services manager with the Comptroller’s Office. Both reports estimated that lost sales tax revenue could be as high as $20 million.

Lost revenues from the airport in 2020 could reach $39 million according to the PSB report. The Milwaukee County Transit System is showing a deficit, but with a $54.9 million allocation from the federal government under the CARES Act they are now projecting to break even in 2020.

“That funding is enough to run transit services for the year, even as it is now not running fares,” Lamers said.

Still, other than the $5.4 million budget gap the PSB report sees, there are a number of areas where the county has already begun to find savings through spending cuts. The administrative order issued by Abele, putting in place the hiring freeze, and the ongoing furloughs, have saved the county an estimated $25 million.

And according to the comptroller report, there’s approximately $20.3 million in expenditures that are directly related to the COVID-19 pandemic that may be reimbursable by the state or the federal government.

And Lamers knits together a number of areas for potential savings and revenue including land sales and CARES Act funding, revenue from contingency accounts and health care savings among others to effectively offset much of the revenue estimated to be lost during the pandemic.

However, these estimates are as fluid as the situation that produced them. Many could rise and fall throughout the year.