ALBANY — The frustrating uncertainties associated with COVID-19 — how long it will last and how bad it will get — are also applicable to the accompanying economic crisis facing people, school districts and municipalities.
The numbers are staggering. In March, unemployment in New York state was 4.2 percent, a month before it was 3.9 percent. In June it ballooned to 15.6 percent and that is after most of the state-imposed restrictions on businesses had loosened. The Dow Jones went from an all-time high of nearly 30,000 for most of February to below 19,000 by mid-March. It has since leveled off and has hovered around 26,000 for the majority of July but uncertainty is still on the minds of pundits and speculators.
There are still segments of the economy locked down, like movie theaters, bowling alleys and gyms but the last phase of Gov. Andrew Cuomo’s re-opening plan went into effect in early July and most businesses are up and running — at 50 percent capacity which, based on simple mathematics, hurts the bottom line as much as the spending public’s fear of leaving the house for anything but basic necessitates.
The downturn is exacerbated by the sudden and drastic collapse coming during a spate of unprecedented economic growth. Counties, and by extension municipalities, estimate sales tax revenue each year to balance their budget. Basing that estimate on the prior year numbers, with an conservative percentage of growth, is common practice.
But nobody expected COVID.
Between January and June of 2020 compared to the same time frame a year ago, Albany County is down about $15.5 million in sales tax revenue alone and that number could grow to $60 million by the time December rolls around, said Albany County Executive Dan McCoy. And that doesn’t include the equally extreme, if not as large, decreases in occupancy, mortgage and other taxes the county and counties across the state rely upon to provide services.
“As the president of County Executives of America and the County Executive Association of New York State Association of Counties, I’ve heard from my counterparts talk about the difficult decisions they’re considering to address their budget crises including closing parks, steep cuts to programs and even layoffs,” he said. “No one wants to this, but at this point, Congress and the President are forcing our hands.”
As of Monday, Aug. 3, stimulus package No. 5 was still being debated in Washington. One version would bring $3 trillion to all the states with about $1 trillion earmarked for local governments and school districts. A second bill under consideration would not. Also up in the air is whether or not the $600 added to unemployment benefits will continue or if it will be a lesser amount or none at all. And while there is some agreement on the second $1,200 check to individuals, it is not set in stone.
“They need to do what’s right and fair and prioritize smaller counties that have been on the frontlines of the pandemic and have been left behind in the last four stimulus packages,” McCoy said. “The last $2 trillion stimulus package only helped localities with more than 500,000 people and the majority of it went to states not to the counties. It didn’t help counties like Albany and counties like Albany are on the front line of this every day.”
Other side of the ledger
Not only are revenues down, but expenses are up. The county is supplying Personal Protection Equipment like masks and hand sanitizers, offering COVID-19 testing for the uninsured and having to shuffle workplaces so employees can maintain six feet of social distancing. The Department of Health has a host of new responsibilities like tracing the contacts of anyone infected with COVID and law enforcement, like the Sheriff’s Department, has the added responsibility of making sure businesses follow state safety protocols. The Department of Public Works is spending time and money on sanitizing the work spaces and mental health and other social service programs are busier now than ever. How much all that is costing has not yet been calculated.
The decrease in tax revenue and increased expenditures come when there is a potential across the board 20 percent cut in state aid looming should Washington not come through with state assistance in the next stimulus package, Cuomo said. Right now the state is running a $13 billion deficit, he said, and that could grow to more than $60 billion by year’s end.
It took six to eight years to come back from the last recession In 2008 to 2009, McCoy said, but compounding this downturn is nobody is sure what will happen this fall and if COVID will come back in a “second wave” or if things will continue as they are until there is a vaccine sometime in 2021.
“I’m worried about 2021 and 2022 because there is a ripple effect on income, and I fear we will see a number of businesses just not being able to come back” McCoy said. “We are all going to have to roll up our sleeves and make some hard decisions.”
The Capital District was largely isolated from negative impacts of the ‘08 recession because it is home to state government, and with that came some assurance a number of well-paid public sector jobs would remain through difficult times. As of yet, while there have been a handful of local layoffs, no county or state employee has lost their jobs.
“In ‘08 we were somewhat insulated, but if we don’t get federal help, the governor is going to lay off people, the counties are going to have to lay off people and the school districts are already making hard decisions,” McCoy said.
Private companies have resorted to layoffs, furloughs and many are still struggling to make ends meet. McCoy said last week he sent a letter to the unions representing county workers on Friday, July 31, warning them of what could happen in the not so distant future and reminding them that “we are all in this together.”
Not just Albany
Late last month, the New York State Association of Counties released an economic impact report and it found the 62 counties in New York state are looking at a $13.5 billion loss in revenue over the next two fiscal years.
“It could lead to significant cuts to services and permanent layoffs, slowing the economic recovery and threatening gains made against the virus,” said Steven Acquario, executive director of NYSAC. “New York counties need $5 billion over a two year period just to make them whole from the injury we will have sustained in 2020 and 2021. That is why we need the House the Senate the President to come together to provide direct and flexible funds to the local governments and the state of New York.”
According to the NYSAC study:
• Over the next 12 months sales tax losses could be between $1 billion to $1.3 billion for the 57 counties (not including New York City.)
• In 2020 and 2021 there could be a $4.9 billion loss of sales tax revenue in all counties including New York City.
• There are 1.4 million less jobs in New York compared to this time last year.
• Hotel occupancy tax is down nearly 80 percent in counties across the board equaling between $50 and $80 million excluding New York City.
• Gaming revenue has stopped completely for a loss of between $57 and $86 million.
Some steps counties are taking, Acquario said, include permanent layoffs, hiring freezes, voluntary furloughs, offering buyouts and closing parks, recreation areas and summer camps and cutting back on other services. In ’08 and ’09, McCoy said, the county relied on short term borrowing to help make payroll.
“The economy of Albany County was strong going into 2020,” Acquario said. “But as we see, Albany County could experience a $25 million hit, an almost 10 percent decline of sales tax alone in a mild economic injury. if you take it to a severe injury the County of Albany alone could see a loss of sales tax approaching $60 million or about 22 percent.
“And all of that injury occurred in four months.”