Wagner: County government could weather COVID storm
Allegheny County may weather the COVID-19 economic storm better than other municipalities thanks to a reliance on real estate taxes and a solid rainy day fund, but both the administration and controller’s office acknowledge it’s raining hard and a lot remains unknown about the storm front.
The county finished 2019 in a “financially auspicious” position and was off to an “optimistic” start in 2020, said Allegheny County Controller Chelsa Wagner, who presents her annual fiscal review Friday.
The county closed the books on 2019 with a general fund balance of $89.8 million. The county pulled in $312 million in property taxes, by far its largest revenue stream, followed by $164.8 million in state funding, mostly for health and children, youth and family services; $154.5 million in charges for services and facilities; $56 million in federal funding, mostly for corrections and social services; $51.8 million in sales and use tax; and $21.6 million in Regional Asset District funding.
So far this year, the county’s property tax collections are lagging just 2% — or a total of $4.4 million — behind last year’s collection pace, according to the controller. And because of the extended tax deadline, Ms. Wagner’s office expects most to be made up by the June 30 collection
deadline.
It’s the revenue streams lower in the ranks that have been hit the hardest.
The drink and car rental tax, which funds the county’s share of transit costs, is down 8% — or $3.6 million — compared with the first four months of 2019. The county’s share of the additional 1% sales tax is behind pace by 6%, or $2.3 million. The hotel tax, which funds construction debt on the David L. Lawrence Convention Center, as well as tourism initiatives, has netted only $8 million so far this year. That’s down from $10.1 million at the end of April 2019, or 21%, according to the controller’s office.
“I have advocated since taking office eight years ago for cultivating a healthy fund balance, and the county administration wisely made this a priority as well,” Ms. Wagner said in a news release. “While growing the fund balance has had real fiscal benefits even before now in terms of improved bond ratings and reduced borrowing costs, in the current fiscal climate, the availability of these funds is truly invaluable.”
However, what worries Ms. Wagner is the funding streams that remain up in the air, she said.
“The biggest factor for us is really the unknown, the downstream impact of those funds that come from those federal and state revenues,” she said Thursday by phone.
Additionally, that the county’s pension fund was funded at only 42.7% with a net pension liability of $1.2 billion at the end of 2019 also concerns her. Should layoffs or early retirement be needed as a cost-cutting measure by the county, Ms. Wagner said she’s concerned about losing employee contributions, which now stand at 10%, according to her office.
“I hope we don’t have to get there, and that’s why I want to make sure we have these robust conversations,” she said.
In an interview on May 21, county budget officials said layoffs among the roughly 7,000 employees would be a “last resort.”
Rather, the county is looking to cut expenditures, scrutinize contracts and procurement, has instituted a hiring freeze, eliminated summer internships and refinanced its bond debt, a measure expected to achieve between $15 million and $20 million over the next two years, County Manager William McKain said.
“We’re hoping those efforts offset the loss of revenues,” he said. “If we don’t achieve the savings we desire, then I’ll look at other aspects of our budget. But we’re trying to do everything we can to hold off on any layoffs or impact to personnel.”
The “employee driven service agency” provides 911 services and policing; manages corrections and court facilities; runs a health department, as well as four assisted and senior living facilities; provides mental health, intellectual disabilities, addiction recovery and family health services; and manages nine parks composed of 12,000 total acres and hundreds of miles of roads, Mr. McKain said.
“People really count on county government,” he said.
Under the massive $2 trillion federal CARES Act, the county is eligible to receive $212 million in emergency funding.
Mr. McKain said county budget and legal staff are assessing what those funds can be used for and should have an allocation plan finalized by mid-to-late June.
The county also received roughly $12 million in emergency housing and community development block grant money.
As for whether the county plans to dip into the rainy day fund?
“As we say here, it’s really storming right now,” Mr. McKain said. “We’re going to do everything we can to preserve that, but it is there as a resource; that’s why we continue to monitor our expenditures and forecast our revenues.”
According to the controller’s report, the county spent $768 million last year. The county’s bond obligation landed at $896 million at the close of 2019, a $43 million reduction from 2018. The annual debt service payments stand at approximately $70 million, according to the report.
The administration was not able to respond to the controller’s fiscal review before Friday, as it had not seen it, said county spokeswoman Amie Downs.
On May 14, the conservative-leaning Allegheny Institute for Public Policy warned of dismal revenues “unlike any decline ever seen in such a short period” for the county and other municipal governments.
“It may be prudent at this point to consider furloughs of non-essential personnel,” the Mt. Lebanon-based institute’s news release read. “In addition, it might be necessary to tap into any fund balances that are available to meet expenditures, especially if the revenue shortfalls continue for several more months.”