The COVID-19 pandemic could result in an estimated $23 billion in revenue losses and $3.7 billion in unanticipated expenses for local governments, according to a survey of state and local government officers.
The survey, conducted by the Government Finance Officers Association (GFOA), found that most respondents are concerned about declines in fee or penalty payments, decreased sales tax revenue, and delayed utility payments. Over half the 1,100 respondents were from "smaller jurisdictions" with annual operating budgets under $100 million.
Results of the survey, released March 23, show that respondents anticipate having to cut spending on transportation, education, and social services in the near term in order to ramp up their public safety and health responses.
The survey was conducted the week of March 16, when the number of U.S. coronavirus cases was approximately 25,500; as of press time, the number of cases in the United States is up to approximately 85,400, according to the Centers for Disease Control. Given that increase, the GFOA said the monetary figures would likely be higher now.
“We did the survey last week and, frankly, that survey was just a lot of people in shell shock. I think [those numbers] would be much larger,” Emily Brock, director of the GFOA’s federal liaison center, told Tax Notes March 27.
Brock said the association is planning a follow-up survey in light of the federal $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) bill enacted on March 27. States are eligible for reimbursement for COVID-19-related expenditures.
The legislation earmarks $150 billion in direct aid to states, with a minimum of $1.25 billion dedicated to each state. However, there are ambiguities in the legislative language surrounding the definition of COVID-19-related expenses.
Many states and localities also have outstanding bond proceeds, potentially to be used for construction projects that are now on hold. “We will certainly be talking about eligibility of tax exemption and the use of bond proceeds outstanding,” Brock said. “There’s not a lot of clarity in the bill text, but the devil is in the details when it gets to the Treasury.”
A total of $26 billion in debt issuance was planned for capital projects by respondents' governments, but more than half of those plans are now uncertain, according to the survey.