Whether they do it through the mail, some in-person form of early voting, or by actually standing in a socially distanced line to cast a ballot on one of the state’s new machines on Election Day, voters choosing candidates in this year’s elections need to focus renewed emphasis on a specific trait from the campaign trail: Who can govern most efficiently with the least amount of money?
As much as the coronavirus has ravaged the private sector economy, and will continue to do so for months, maybe years, to come, government revenue streams also are going to be severely negatively impacted.
This will especially prove to be significant for state and local governments which, unlike their federal counterparts, cannot simply decide to operate with trillion dollar deficits as they write checks for which no money is in the bank.
Results of a recent Georgia State University study suggests that Georgia is likely to lose more than $1 billion in sales tax revenues as a result of the pandemic. And that’s just at the state government level. Millions more will be lost in local sales tax programs.
The Times editorial board
- Norman Baggs, general manager
- Shannon Casas, editor in chief
- Cheryl Brown
- David George
- Brent Hoffman
- J.C. Smith
- Tom Vivelo
- Mandy Harris
But it’s not just sales tax revenues lost to the crashing of our consumer-based economy.
Roads, bridges and transportation projects throughout the state depend on motor fuel taxes for financing, but fuel consumption is down because fewer people are driving. Expect motor fuel tax collections to drop precipitously.
Revenues generated by visitors who stay in hotels and motels across Georgia fund a broad variety of local programs, many focused on tourism and community promotion. The same GSU study notes the American Hotel and Lodging Association was reporting occupancy rates of only about 25% in mid-March. It is likely those numbers have worsened.
Taxes on everything from restaurant alcohol sales to entertainment event tickets generate revenues for government. And they are all in the tank.
Given the extent to which the economy has been disrupted, it seems safe to say that virtually every traditional revenue stream upon which local and state budgets are built is likely to be reduced now and for many months to come.
Of course the biggest question will be how the economic symptoms of the coronavirus will affect personal income tax collections, which finance roughly half of the state budget. If unemployment reaches the levels some are anticipating and stays there, collections will have to suffer.
Georgia Speaker of the House David Ralston, in arguing for the need for the state legislature to wait until June to reconvene rather than doing so in May, said the primary reason for delay was so that state officials can have access to viable numbers from April in trying to draft a budget for the state’s coming fiscal year.
While there is some merit to that argument, we have to wonder if even the best of the state’s budget gurus will be able to read the tea leaves and guess what may happen over the next several months as businesses try to reopen and customers adjust to lingering changes in our way of life.
Those responsible for drafting and approving the state budget that will go into effect July 1 will face a Herculean task. It’s likely that the optimistic talk of raises for employees and support for projects that just two months ago seemed very feasible will be forgotten as the stark reality of the state’s financial picture comes into focus.
Remember too that during a crisis such as this, state and local governments have to tap existing reserves to supply funding for emergencies. That nice cushion many governments had thanks to years of positive economic growth will have been dramatically diminished.
At every level of government, the drop in available revenue is going to be dramatic for the near term, and the level of services governments can provide will have to reflect those decreases. Unlike the federal government, state and local governmental entities cannot operate at a deficit.
State, county, city, schools. All will be affected.
Speaking of the federal government, Senate Majority Leader Mitch McConnell suggested in April that state governments should consider going bankrupt as a means of solving their financial woes. Many questioned the constitutionality of such a notion.
The reality of the public funds crisis should be at the forefront of every conversation related to this year’s elections. The key to returning to long-term prosperity at all levels of government is going to be having elected officials capable of getting the most bang for the taxpayer’s buck, not electing those whose political platforms are built on promises that defy financial reality.
At the local level, it is more important than ever that voters in Gainesville and Hall County approve the continuation of the 1% sales tax for schools that is on the primary ballot. The loss of revenue from the current tax program is going to be a major setback; continuing the program to provide needed funding is more important than ever.
None of us know yet the full impact of the economic crisis on the operation of government, but it is impossible to imagine that it will not be substantial, potentially devastating in some areas. All government services are likely to be pushed to the limit as the demand for desperately needed services – first responders, unemployment, job training, food stamps, social services, health care, financial support for schools, and on and on – continues to rise while the tax revenues for providing those services is slowly rebuilt.
There has been much talk of late of “essential jobs.” The year to come may include a redefining of “essential services” at all levels of government.