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#COVID19 Is Forcing State and Local Governments to Make Painful Budget Choices Ahead

#COVID19 Is Forcing State and Local Governments to Make Painful Budget Choices Ahead | Newtown News of Interest |

Here’s the problem in a nutshell: Government at every level relies on revenue estimates when planning budgets. More than a year in advance, council, commissioners and county executives anticipate how much the economy will grow, how much the usual taxes (income, sales and property among the larger sources) will rake in and then authorize spending on such broadly popular purposes as paying teacher salaries as well as those of police and firefighters, upgrading transportation (from building roads to filling pot holes) and addressing a host of other small, yet important responsibilities from reviewing development plans to maintaining public parks. The abruptness and jaw-dropping scale of the current downturn could surely never have been anticipated even weeks ago.


Governments have installed some protections such as surpluses and rainy day funds (a balance that is tapped only in the event of an unanticipated emergency) but none is anywhere near enough to cover what’s eventually coming their way. The state government’s reserves might float its general fund obligations a month, for instance. So they have two options but really only one. Officials can cut spending or they can increase taxes. And given how any elected leader who dares pursue a tax hike right now would mean his or her own unemployment courtesy of the ballot box, it’s really just about cutting spending. At first, there will be fat to trim, efficiencies found, public relations campaigns that can be deferred, contracts that can be delayed. Then there are the tougher choices like hiring and pay freezes. And then, as things get bad, the dreaded "f" word — furloughs or unpaid holidays or even salary reductions for government workers.”

johnmacknewtown's insight:

Newtown Township especially faces painful choices. At the April 22, 2020, Board of Supervisors, the Township Manager suggested that he will recommend that the general operating budget be supported by a real estate tax next year. Currently, all RE tax collected is earmarked for debt reduction and emergency services. To help keep the township afloat until the end of the year, the township has already made some "drastic" choices. For more about that read "Rough Road Ahead for Newtown Township"; 


UPDATE (9/8/20): At the August 31, 2020, [Act32Bucks] Bucks County Tax Collection Committee meeting, Joseph W. Lazzaro, who represented Keystone, which collects EIT,  reported that for Bucks County as a whole EIT collections are down by only $13,000 compared to 2019 which was a banner year. Mr. Lazzaro anticipates that by end of that today all this and more will be collected. 


Obviously, results depend on local residents. Mr. Lazzaro pointed out that if a collector area (e.g., school district or township) has a lot of employees who work in the restaurant industry then EIT will be impacted more than if residents worked in healthcare and the pharma industry (which is more like Newtown). He even suggested that the latter type of employee may be making more money this year than last year and thus be paying more EIT offsetting any loses from other more vulnerable employees.

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Newtown News of Interest
These Scoops are excerpts from articles published in local newspapers and other sources that may be of interest to Newtown area residents. Please click on the "From" link to access the full original article. Any opinions and "insights" appended to these article summaries are solely those of John Mack and do not represent the opinions of any other person or entity.
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