The impact of coronaviru crisis on city finances across California

San Jose will face an inevitable economic crisis stemming from this pandemic. Proceedings in other cities may point towards a rough road ahead as Dan Walters reports for CalMatters. 

“California’s nearly 500 cities had been hurting financially even before the COVID-19 pandemic clobbered the state’s economy and triggered a downward spiral of tax revenues.

“With a pandemic-induced recession, California’s city officials are now hastily revising their budgets for the current fiscal year, which ends on June 30, and drafting new plans for 2020-21 that anticipate severe drops in revenues.

“The state’s largest city, Los Angeles, typifies the syndrome. Mayor Eric Garcetti last week proposed a $10.5 billion 2020-21 budget that slashes appropriations throughout city government and would furlough 16,000 workers.

“Los Angeles and the five other California cities with populations of more than 500,000 will get some relief from Washington. The $2 trillion CARES Act contains aid for large cities, but it must pay for COVID-19 costs, not offset lost revenues, and must be spent by Dec. 31.

“Sacramento is the smallest of the six and Mayor Darrell Steinberg expects to receive $89.6 million from CARES, almost exactly the city’s estimate of its projected shortfall from revenue losses related to COVID-19.

“This $89,623,427 stimulus check from the federal government starts our economic recovery,” Steinberg tweeted last week. He intends to use the CARES money to jump-start economic enhancement and housing projects promised from a sales tax increase approved by city voters last year, thus freeing up the sales tax money to plug the state’s budget deficit.

“While CARES may help big cities to avoid fiscal meltdowns, it does nothing for California’s other 400-plus municipal governments, which are coping with many of the same issues, especially big drops in sales tax from shutdowns of retail businesses.

“With the pandemic now in full bloom, erasing millions of jobs, asking Californians to pay higher taxes would be a fool’s errand. Cities will have to weather, as best they can, the perfect storm of rising demands for spending, plummeting revenues and hostility to new taxes."

Read the whole thing here..

Dan Walters is a journalist for CalMatters. He can be reached at: danwalters@calmatters.com.

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