In a previous blog post, The COVID-19 Crisis and How North Carolina Local Governments are Budgeting for It, I laid out the results of a survey that the NCLM and the NCLGBA had conducted to counties and municipalities across the state in April.  In this week’s blog post I am going to provide an overview of an updated survey that was send out in May.  This survey had fewer respondents, but also provides more up-to-date information about the strategies and plans that local governments in North Carolina have, with another full months of information and better understanding of how COVID-19 is impacting their jurisdiction.

First of all, this survey was closed May 15th and had 73 complete or mostly complete responses.  4 were from counties and 69 were from municipalities.  Largely, the survey is the same as the one from April, with one notable difference, questions were added about interim budgets, pushing back the date of the budget adoption, and planning on possibly adjusting the budget with a budget amendment later in the fiscal year.

Let’s start there then.  45 respondents said that they are not planning on adjusting when the budget was adopted.  So, if they normally adopt the budget on June 11th, they are still planning on adopting the budget on June 11th.  8 respondents said they were unsure, and 20 say yes—meaning that they are pushing back the date of the budget adoption.  For example, one respondent said the board’s adoption meeting was on June 11th and it is now scheduled for June 21st.  So while the majority are still on track for the budget adoption to occur as originally planned, quite a few have pushed it back.

However, while some have talked about interim budgets, it seems like it is an uncommon strategy for this fiscal year.  Only 4 said they were considering passing an interim budget and another 4 said they were unsure if it was being considered—otherwise the responses were no.

Once again, the survey asked respondents to share their projections for sales taxes (by quarter), property taxes and occupancy taxes.  Sales taxes, not surprisingly, are expected to be the most impacted.  For most reporting jurisdictions, the impact is expected to be relatively minor by the third quarter of fiscal year 2021.

For Q4FY20 (the current fiscal quarter), 1 reported anticipating growth in sales tax revenue, 5 reported expecting no change in anticipated revenues, 12 reported an anticipated decline of 0-5%, 11 reported an anticipated decline of 6-10%, 30 reported an anticipated decline of 11-20%, and 4 reported an anticipated decline of more than 20%.

For Q1FY21, 1 reported anticipating growth in sales tax revenue, 1 reported expecting no change in anticipated revenues, 18 reported an anticipated decline of 0-5%, 15 reported an anticipated decline of 6-10%, 18 reported an anticipated decline of 11-20%, and 10 reported an anticipated decline of more than 20%.

For Q2FY21, 3 reported expecting no change in anticipated revenues, 24 reported an anticipated decline of 0-5%, 19 reported an anticipated decline of 6-10%, 8 reported an anticipated decline of 11-20%, and only 1 reported an anticipated decline of more than 20%.

For Q3FY21, 9 reported expecting no change in anticipated revenues, 31 reported an anticipated decline of 0-5%, 6 reported an anticipated decline of 6-10%, 8 reported an anticipated decline of 11-20%, and none reported an anticipated decline of more than 20%.

For Q4FY21, 7 reported anticipating growth in sales tax revenue, 9 reported expecting no change in anticipated revenues, 25 reported an anticipated decline of 0-5%, 6 reported an anticipated decline of 6-10%, 6 reported an anticipated decline of 11-20%, and none reported an anticipated decline of more than 20%.

Property taxes are expected to not be as adversely impacted as sales taxes.  19 report no change expected in property tax revenue next fiscal year. 19 are anticipating growth in property taxes next fiscal year.  Twenty-eight are anticipating property tax revenue reductions of between 0-5% and only 1 respondent reported expecting property taxes to go down between 6-10%.

Occupancy taxes are expected to follow a trajectory more like property taxes though.  While 17 responded no expected changes and 1 reported expected growth in occupancy tax revenue, the majority reported significant declines.  Three jurisdictions reported declines of 0-5% and 4 reported declines of 6-10%.  However, 6 reported declines of 11-20% and 4 reported expected declines of greater than 20%.

 

How are jurisdictions planning on balancing their budgets in the face of these declines?  One common tactic is through staffing choices.  Forty-one report no new positions being budgeted for, 18 report a hiring freeze, 7 report lay-offs, 2 report using furloughs, and 6 report reducing employee benefit levels.

Other budget balancing techniques being employed are: 42 are reporting delaying or canceling capital improvements and purchases, 39 report using fund balance, 7 are cutting public services, and 7 are closing facilities.  In terms of generating more revenue, only 14 report increasing fees and 4 report increasing taxes.

The results of this survey are largely in keeping with the April survey suggesting that more information about both the reopening of the economy (Governor Cooper announced his phased plan between the two surveys) and the impact on unemployment and the private sector did not change the early strategies or revenue forecasts significantly.  A more detailed analysis of the results of the first survey is available as a bulletin here, it also discusses best practices and a brief overview of relevant research.