Findings: Early estimates show local governments are experiencing substantial financial impacts due to the coronavirus outbreak. GFOA conducted an online survey of finance officers last week, approximately 1,100 finance officers responded with more than half representing smaller jurisdictions. In just the two weeks prior to the survey as the coronavirus began to spread, 1,100 respondents estimate spending nearly $2 billion in unanticipated expenses and are projecting to spend at least $5 billion over the next six months on unanticipated expenses. Moreover, respondents project over $23 billion in revenue losses due to the outbreak. And based on the survey responses, a majority of the governments planning to issue debt for capital projects are now uncertain on moving forward due to current market conditions.
Survey Results Quick Snapshot as of March 23, 2020
States and their local governments are on the frontlines of the war on COVID-19. We know this crisis will have immediate – and possibly, long term – impacts on government revenues and expenditures. When asked to project the amount and sources of the highest unanticipated expenses looking out over the next six months, the aggregate of responses totaled over $3.7 billion and the top three sources were staff sick leave, equipment and technology, and staff overtime. Looking once again at the respondents with operating budgets of $100 million or less, nearly 15% of those smaller governments were projecting the expenses for the next six months could be anywhere from 1 percent to over 30 percent of their operating budget (e.g. for a small government with an operating budget of $75 million, 1 percent is $750,000).
As local governments prepared to ramp up the public health and public safety responses due to the coronavirus outbreak, we asked respondents to predict in what areas they may implement reductions or cuts to counter that increased spending. Some of the top areas indicated were transportation and education.
Respondents indicated a number of revenue sources available to their jurisdictions, many of which could be impacted given the current measures being deployed to slow the spread of coronavirus.
Given the varied sources of revenue, respondents collectively projected over $23 billion in revenue losses due to the outbreak. We then asked respondents to identify which unintended consequence as a result of the outbreak concerned them the most as it related to projected revenue losses. Decline in fee or penalty payments, decrease in sales taxes and delayed utility payments were among the top three rated concerns.
Finally, GFOA asked respondents to weigh in on how the virus outbreak’s impact on financial markets might alter their debt issuance plans. The aggregate amount of current planned issuance reported by respondents totaled over $26 billion. The plans to move forward on more than half of that amount are now uncertain since the majority of respondents indicated they are unsure whether they will delay their plans to issue debt for capital projects given the current market conditions. Again looking at the subgroup of respondents with an operating budget of less than $100 million, over 15 percent of those smaller governments were looking to issue debt for projects in amounts ranging from 10 percent to nearly 50 percent of their operating budgets.
While it is important to note that these are early estimates at this point, it is more important to note that these expenses and revenue losses are unexpected so the ramifications for local governments will be significant.