Kansas City could slash nearly $300M in a ‘worst case scenario’ COVID-19 recession
In a “worst case scenario” recession brought on by the coronavirus, Kansas City could have to slash its budget by almost $300 million and furlough or eliminate hundreds of employees and cut programs, staffers told a City Council committee Wednesday.
The city’s budget office predicted in March — shortly after Mayor Quinton Lucas issued a stay-at-home order — that a “light recession” and speedy recovery would knock $115 million out of its budget over the next five years. But some council members feared that report was too optimistic.
Budget staffers returned to the Finance, Governance and Public Safety Committee on Wednesday with a more dire scenario: cutting $292.5 million over the next nearly six years.
“The result will probably be somewhere in the middle,” said Scott Huizenga, the city’s budget director.
But right now, it’s hard to say how drastic any budget cuts might need to be because the city is in the “eye of the storm” of the COVID-19 pandemic, said Kolbe Krzyzanowski, a senior analyst in the budget office.
Huizenga said Missouri’s overall sales tax collections were still high in March, though the city’s convention and tourism sales taxes plummeted by 90% that month. The city doesn’t have figures for April yet.
“Obviously, we don’t expect that trend to continue. We expect … there will be some form of reduction,” Huizenga said, adding that the data doesn’t help budget officials predict what may lie ahead.
Its largest tax revenue source, the earnings tax, is coming in more slowly than usual, but that’s because the city delayed the filing deadline to offer residents some relief. Huizenga expects much of that missing money to come in between now and July.
By July or August, he said, the budget office should have a clearer picture of how the crisis is affecting the city’s revenue.
In the meantime, he said, the City Council could consider cost-cutting measures.
“If council wanted to consider either pay freezes … or furloughs, I don’t think it’s too early to at least consider that,” Huizenga said.
Furloughing all city employees for two weeks over the course of the year would save $13.1 million, he said, which he said is likely far below the amount the city will lose.
Budget officials said the city could cut $292.5 million through a variety of means. A 5% cut to operations would yield nearly $50 million a year. The city could also consider a pay freeze or cutting about 500 positions.
But Huizenga said it’s too soon to consider those more drastic measures.
While the city is “not out of the woods,” Huizenga said diverse revenue streams and a healthy rainy day fund mean it’s in a much stronger position than it was at the onset of the Great Recession.
“Unlike the previous crisis in 2008, we’re going into this one with the highest reserves in recorded history for Kansas City,” Huizenga said. “A strong economy and solid fiscal and strategic planning — and sticking to those plans for the last number of years — have placed us in a much stronger starting point than we were at the beginning of that period.”
This story was originally published May 13, 2020 at 1:20 PM.
