State braces for budget shortages due to covid-19
Across the state, in every city, town and county, businesses have been shut down, and thousands have lost jobs, savings and retirement incomes that may never return. During these times, Arkansas’ cities, towns and counties are taking extraordinary steps to protect their citizens, properly equip first responders with PPE to fight this pandemic and provide public safety to keep their residents safe and healthy.
The city of Bella Vista is doing all of this while maintaining essential services we’ve all come to rely on in our daily living. Our garbage is being collected each week, our streets and roads remain maintained, our police and fire departments and emergency medical services continue to work to ensure our public safety. Our code enforcement officers and building inspectors are also “on the job.”
The city, thus far, has been able to maintain the status quo for citizens while fighting covid-19. However, as this pandemic continues, the increased demand for funding will impose severe strains on our city budget.
Most of our cities, towns and counties rely on sales tax for a significant portion of their revenues. The city of Bella Vista is no exception, with over 50% of our revenue dependent upon sales tax. The coronavirus has disrupted the underlying activity that results in the collection of these taxes. We’re seeing canceled events, scaled-down commercial activity especially in the restaurant sector, and small businesses shutting their doors in an effort to flatten the curve and mitigate effects of the coronavirus as much as possible.
The city has a strong reserve, however, it will not last indefinitely. Already cash-strapped cities, towns and counties in Arkansas are in dire straits as they face plunging tax revenues and spiking costs due to covid-19. The Arkansas Municipal League recently polled its members and found that local leaders are anticipating an average revenue shortfall of 26.5 percent between March 1 and Dec. 31, 2020, with the primary factors being unanticipated revenue declines and expenditure increases due to covid-19.
The city of Bella Vista has implemented a three-tier approach to reduce expenses during these uncertain times. Tier 1, which was implemented three weeks ago, has reduced our 2020 budget by $735,000. Tier 2 will reduce capital expenditures and Tier 3 will reduce benefits. Our goal is to avoid furloughs and lays offs which will impact services to our residents and adversely affect the livelihoods of our employees.
The Association of Arkansas Counties compiled information from various state agencies and estimates that counties will see a 40 to 50 percent reduction in road money because, according to Gov. Asa Hutchinson, interstate traffic has been reduced by more than 50 percent. County and city road funding is dependent upon gas and diesel purchasing. Loss in sales tax revenue is speculative at this point because the March collections do not come in until mid-May. Retail sales have been down 8.7 percent in the last month, according to the state. The state legislature has cut turnback funding by 15 percent for the next year for cities, town and counties. Also, local governments can expect a dramatic reduction in court fines, as well.
Take a moment to consider the Families First Coronavirus Response Act (FFCRA), which requires certain employers, including local governments, to provide their employees with paid sick leave and expanded family and medical leave for specified reasons related to covid-19. In the private sector, businesses receive tax credits for this mandate. Yet local governments will not receive these same tax credits, leaving cities, towns and counties that are already strained from the added expenditures of covid-19 mitigation plans to somehow also find a revenue stream to pay for the FFCRA leave. For Arkansas’ cities, towns and counties, the collective price tag is unknown currently. According to the Congressional Budget Office, the FFCRA mandate could amount to $20 billion over the next two years for state and local governments.
This mandate will push local governments to the brink of economic disaster and force them to scale back public services, slash spending, and lay off municipal and county workers. The cost of the FFCRA mandate will directly impact Bella Vista police, streets and fire departments, as well as emergency medical services. This will leave every citizen in Arkansas vulnerable.
Bella Vista’s estimated population is 31,000 spread over 47 square miles with 550 miles of streets (more than the city of Little Rock). We have made great strides over the past five years improving infrastructure and service to our residents. We have a bond issue approved by our residents in March to build our first public safety building, replace an outdated fire station and build a fire training facility that will also improve our fire response time in the growing southwest area of Bella Vista. This may also be in jeopardy.
The Coronavirus Relief Fund has provided Arkansas $1.25 billion to help state and local governments pay for the costs of this health crisis. While we enter uncharted water, it is critical to the well-being of our citizens that our cities, towns and counties are provided with the funds needed to continue to battle this virus while maintaining the expected, essential services. Arkansans need their municipal and county governments now more than ever during these unprecedented times. It is crucial that we, the leaders of local government, step up to the plate to face the enormity of this crisis and stand up for the resources we realistically need.