Changes in expenses or revenue may cause long-term city, county budget impacts
LA CROSSE, Wis. (WKBT)– As the coronavirus pandemic continues, cities and counties are preparing for increased expenses combined with losses in revenue. Taking a hit in revenue from sales tax, property tax and other state funding could significantly impact their budgets.
One of the biggest sources of revenue for La Crosse is property taxes– it made up about half of the city’s revenue in 2019. The latest payment was due at the end of March. Mayor Tim Kabat said there were some inquiries about delaying or postponing that payment.
But so far, delinquent payments are down from last year, according to Kabat. It has yet to be seen what will happen in May when the next payment is due.
“I don’t think we should see hopefully any issues with our property tax collections,” Kabat said.
That’s good news. But one of the biggest local impacts could be changes to sales tax and room tax collections.
Sales tax comes back to municipalities through the form of shared revenue. Kabat said through conversations with the governor and state legislators, they want to make sure they continue to receive as much as possible. He hopes the legislators will meet soon to take up some of these issues.
One of the biggest impacts could be changes to tourism, especially for specific expenses. For example, the city increased the room tax to help pay for part of the La Crosse Center renovation and expansion project. But without people staying at hotels, that could mean they don’t raise as much as anticipated.
“We’re going to see that impact for this year, and who knows, it could be into next year as well as people just make adjustments for travel,” Kabat said.
Kabat said the city tries to have in its reserves about 20% of the annual operating budget. That could be used in the short term for certain expenses, but he would prefer to look at other options. That could include assessing how projects are financed or ways to do an interest-only payment, but financial experts are currently assessing potential options for the city.
“Our hope, of course, is that we don’t need to tap into those reserve funds,” Kabat said.
He said the city is trying to gather initial estimates of some of the expenses and losses in revenue. It hopes to have that ready for the May common council meeting.
Meanwhile, the county is concerned about potential losses in sales tax revenue from the state.
La Crosse County Administrator Steve O’Malley said a half percent of the state’s sales tax comes directly to the county to offset the cost of area services. It accounts for nearly eight percent of the budgeted revenues for 2020.
“We’re likely to see a significant drop in that, although it’s too early to tell,” O’Malley said.
Also of concern, as staff members are reallocated to other needs, this may reduce the flow of revenue that helped pay for the employees.
There may be a way to pay for some increased expenses, like a high demand for Health and Human Services. FEMA and the CARES Act might help cover some of these costs. O’Malley said he is working with the Wisconsin Counties Association and the Governor’s office to see what may be reimbursed.
Like the city, the county has some reserves but the longer this goes, that could be concerning.
“I’m most worried about the end of 2020 and what happens in the 2021 budget,” O’Malley said.
The annual budget is created every year starting in the summer. The difficulty for departments will be comparing their actual expenses versus projected expenses for the current year, and then using that for next year’s budget.
For example, what the health department was allocated for its 2020 budget may be vastly different than what has been spent because of the pandemic. Or, consider the La Crosse County Sheriff’s Department budget. It has drastically reduced its daily population in the jail, but this could also change in the weeks and months ahead.
“So how do you take that into account then when you go to plan the 2021 budget,” said Tara Johnson, chair for the La Crosse County Board.
Departments consider may these changes in revenue or expenses as a one-off, or they may have to build in budget protects for that for 2021 and beyond.
Ultimately, the new county board will face these issues as soon as they’re sworn in next Tuesday. Johnson said the members will have to wait to see what the long-term implications are and make tough decisions about prioritizing services and the costs.
They’ll have to be responsive, especially with changing demands. On one hand, you might have a reduction in revenue but more demand in other areas like for child protective services, economic development or law enforcement. All of which has yet to be seen.
“Trying to navigate through all of that, I think will be especially challenging for the county administration and board,” Johnson said.