Coronavirus has killed thousands. It could also bankrupt your southern Illinois city.
While Congress is sending nearly $14 billion to help Illinois repair the economic damage inflicted by the COVID-19 pandemic, little of it will be available to ease the pain downstate communities will face in the form of lost tax revenue and cuts to basic services.
School districts could lay off teachers and cut programs as they compete for state dollars with health and emergency services. Libraries might cut hours like they did during the Great Recession. Counties could furlough workers and delay important capital projects.
Without additional federal money, the state won’t have enough to help local governments sustain vital services such as education or law enforcement, said Davis Merriman, a public administration professor at the University of Illinois at Chicago.
“The state’s not going to have money to bail out local governments. The state has its own huge problems,” Merriman said. “It’s bad. It’s really bad.”
A federal stimulus package — the $2 trillion CARES Act — provides up to $2.2 billion to large Illinois counties for their COVID-19 response efforts, but offers little to small downstate counties. The money is only available to “units of government” with more than 500,000 residents. In Illinois, that means Chicago, Cook County, and DuPage, Kane, Lake and Will counties.
Because they’re missing out on federal money, downstate counties have already turned to spending freezes and service cuts to account for lost revenue from sales, property and income taxes, said Teryn Zmuda, chief economist for the National Association of Counties.
“Counties rely heavily on tax collection to fund their budgets for the year to provide critical health services, infrastructure and so much more,” Zmuda said. “But their budgets are being hit hard with the decline.”
Illinois finance woes
Federal money for coronavirus efforts in the state’s large counties could arrive as soon as April 24. But even with the federal lifeline, the fiscal outlook for Illinois is bleak. It faces an estimated $2.7 billion reduction in revenues in the fiscal year that ends this summer and a $4.6 billion reduction in the next fiscal year, Gov. J.B. Pritzker said Wednesday at a news conference in Chicago.
That only compounds the financial problems of downstate localities. State aid generated from income, sales and property taxes accounted for 18% of municipalities’ total revenue in 2017, according to a report from the University of Illinois Institute of Government and Public Affairs.
“Any shortfall in revenue from these taxes that the state experiences will also be felt by local governments,” the report stated. “How local governments are impacted will depend on what revenue sources they are reliant on, their financial condition prior to the COVID-19 emergency and the amount of rainy day funds they had saved.”
Congress could provide relief to small local governments through a fourth stimulus package, Zmuda said. President Donald Trump has signed three bipartisan bills, including the CARES Act, to help struggling businesses and unemployed workers.
The national counties association is working with Congress and the White House to “ensure any additional packages really accommodate the needs of local governments, of counties,” Zmuda said. Assistance would ideally come in the form of direct payments at the county level and would address coronavirus-related costs and revenue loss.
“One of the big unknowns is how long is this going to go?” said Merriman. “The other big unknown is how much the federal government is going to give,” Merriman said.
Budgeting in a pandemic
O’Fallon Mayor Herb Roach says he’s frustrated smaller governments won’t see their share of federal stimulus money.
“It’s all going to Chicago,” Roach said. “Not only is our community going to be hit, we’re going to be impacted severely by this.”
Businesses still operating in O’Fallon, a city of roughly 30,000, have already seen up to 80% declines in sales, Roach said. The city plans to help by delaying payments on liquor licenses and other fees. St. Clair County postponed mailing out property tax bills.
The easier it is for businesses to pick back up once Pritzker lifts stay-at-home orders, the better it will be for city finances. Meantime, Roach says the city administration has taken steps to control costs. While the city has not had to make cuts to education or law enforcement, capital expenditures and hiring are on hold.
O’Fallon city council plans to approve next year’s budget on Monday, but some expenditures could be put on hold indefinitely if necessary, Roach said.
The same issues vex southern Illinois county leaders as well, said Monroe County Board Chairman Robert “Bob” Elmore. The county board plans to pass its budget for the next fiscal year in October.
Like in O’Fallon, the county put a hold on all capital expenditures and hiring. They may have to furlough workers. But at least for now, board members plan to see how the fiscal effects of pandemic unfold before making any decisions.
“We’re not sure what we’re going to do,” Elmore said.
