Coronavirus could decimate KC’s budget. Why isn’t the City Council playing it safe?
The coronavirus epidemic is causing monumental damage to family budgets and employer balance sheets. Some economists think one in four Americans could be unemployed in the next 90 days, which would mirror the Great Depression of the 1930s.
This week, in the teeth of that potential calamity, the Kansas City Council will consider a $1.7 billion budget, one that pays for police and fire protection, road and sidewalk repairs, trash collection, health protection and a host of other essential city services.
Council members will cast that vote without knowing how disruptive the COVID-19 epidemic will be. It’s hard to overstate how much of a gamble that is.
The coronavirus crisis has slashed jobs and economic activity. If earnings and tax revenue contract by just 10%, the city will lose almost $27 million in anticipated cash. A 20% reduction in sales taxes — a real possibility if the city’s shutdown continues for months — could cost $50 million or more.
Other taxes, including restaurant and hotel taxes, will almost certainly plummet in the weeks ahead. Utility taxes will also drop. License fees and permits may produce less revenue.
Imagine a $565 million general fund budget falling short by $50 million or $60 million in revenue in one year.
This is not an idle projection. During the two years after the start of the Great Recession, city government cut more than $150 million from its budget. Hundreds of City Hall positions were eliminated. Wages were frozen. Parks went unmaintained. Public safety budgets were reduced.
Does anyone think the coming recession will be less painful than the last?
Yet council members in 2020 have plowed ahead, refusing so far to consider major adjustments to the budget, which was submitted in February. Free bus service remains on the table. More money for housing programs is in the document.
In fact, there is pressure to increase spending — $10 million for 18th and Vine, $2.8 million for more police officers, among other redirections and changes.
Uncertainty about the city’s financial future has led some City Council members to suggest a budget freeze until the revenue picture clears up. On Monday, Mayor Quinton Lucas firmly rejected that idea.
“The budget reflects our priorities,” he said. The council will pass a budget “in a very responsible way.”
But unless the local economy makes a dramatic recovery this summer, the budget now under consideration will end up in shreds. Public spending will have to be significantly reduced, which could mean fewer police officers, not more.
City Hall’s pension plans have been rocked by the collapsing stock market, and contributions from taxpayers may need to increase. Public subsidies for private businesses may require renegotiation.
The mayor and City Council should approach this year’s budget with extreme caution and prudence. Nonessential spending should be postponed. It can always be increased later if the economy does better than expected.
A 90-day spending freeze, with an exemption for required raises, is a reasonable approach. If the federal government provides significant relief for cities, the budget can always be thawed.
Families and businesses are frantically trying to understand the new normal, yet City Hall seems reluctant to acknowledge that its finances will be dramatically different because of the coronavirus pandemic. Unless that approach changes, calamity awaits the city later this year.