City leaders say they favor budget cuts over tax increases in the face of revenue loss due to COVID-19
photo by: Mike Yoder
Lawrence city commissioners said they were largely uninterested in raising taxes to make up for the millions in revenue that the city projects it will lose because of the coronavirus pandemic, but they aren’t ruling out any options right now.
As part of its meeting Tuesday, the City Commission received updated 2020 revenue projections to account for the pandemic and resulting economic slowdown and directed city staff regarding several policy decisions impacting the budget. Those included how much of the city’s savings commissioners are willing to spend down, what service reductions they would consider, and what fee or tax increases they would or would not consider.
Revenue projections estimate the City of Lawrence will lose millions — more than $8 million in the most optimistic scenario — because of the coronavirus pandemic. The projections currently include three potential scenarios, based on an economic slowdown that lasts either three, six or nine months. The projected hit to general fund revenue is about $7.8 million for a three-month slowdown, $9.8 million for a six-month slowdown and about $12 million for a nine-month slowdown. Though the general fund will see some of the biggest financial impacts, projections are also made for nine other funds, which would incur other revenue losses.
City Manager Craig Owens told the commission he was just looking for general guidance to help create his recommendations for the 2021 budget, and that a more detailed conversation would occur later once more data and potential options had been established. Finance Director Jeremy Willmoth said the projections are based on financial models and trends and that the city will update the projections monthly as data becomes available.
City commissioners agreed that they should plan for a nine-month duration and then make adjustments to that plan as needed if the slowdown turns out to be shorter. Though commissioners did not want any options completely off the table, they said they were not interested in raising property taxes to make up for revenue losses and that they would rather look at budget reductions instead. The commission agreed that the emphasis of the city should be to maintain its core services.
Commissioners also agreed that they were willing to reduce the city’s general fund balance, which functions as the city’s savings account, down to 15% of expenditures and maintain the policy that calls for the fund balance to be restored to target levels within five years. The city’s policy regarding its savings level in the general fund aims to keep reserves equal to approximately 25% of its expenditures. The 2020 budget originally projected general fund reserves of about $20 million, or about 24% of expenditures.