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Taxing times during COVID-19 pandemic

While local and county governments staring at unprecedented and largely unknown impacts on how the COVID-19 pandemic will affect their income and costs, there is a growing groundswell among residents statewide for school districts to lower their taxes for the coming year.

County and municipal budgets are completed before the end of the current year and take effect in the coming year, so that means that the budgets that they finalized in late 2019 are the working blueprint for this calendar year. Of course, many of those assumptions, particularly on the revenue side, are out the window.

School districts, however, don’t officially complete their budgets for the following school year until June 30. As all business managers and superintendents will tell you, the budget-building process is a year-round challenge even in a so-called “good” year.

You can only imagine what districts will have to go through to construct a realistic budget to get them through the 2020-21 school year. They can’t realistically postpone adoption of a new budget after the June 30 date, because they need the money from real estate and other taxes to operate during the first quarter of the new fiscal year.

Many of the assumptions that have been put into place in building the budget to this point will need to be reanalyzed and revised drastically. School officials must consider the possibility that students will not return to the classroom in late August or September. Other districts are grappling with the idea of whether there should be distance learning classes during the summer to make up for lost time this academic year.

Is it possible that the entire 2020-21 school year will require distance learning, just as is occurring now? No one can dismiss this possibility with 100% certainty. Some school districts are doing preliminary planning in this direction, especially since some highly respected epidemiologists are warning that there could be a resurgence in COVID-19 cases after our current first wave, and it might come in the fall just when most students are expected to return to the classroom.

Even if students do return, what will the “new” classroom look like as it undoubtedly will be set up for safe social distancing and other safety measures?

Letter-writers to newspapers across the state and a growing chorus on social media have been hammering at school officials to lower real estate taxes for the coming year since some key district costs have been reduced dramatically, they say, citing transportation, building maintenance and food costs as just three of these areas.

Of course, the big-ticket item - full-time salaries and benefits primarily for professional and support staff - remains unchanged for the most part, although some part-time support staff have been furloughed for the time being.

Financial analysts say that even under ideal circumstances, creating an annual budget is a crapshoot because of uncertainties and surprise events. Since we have never even remotely encountered any disruption such as this in our lifetime, trying to forecast budgetary goals under these conditions is like trying to do it with a blindfold, they said.

Government officials are trying to be understanding during these tough times. Those who pay federal and state income taxes get an extra three months this year with the deadline moved from April 15 to July 15.

It’s much more difficult for county and local governments to postpone tax payments, because - let’s put it bluntly - they need the money this year more than ever to pay for essential services. Some communities and counties are allowing taxpayers a longer period to qualify for the early-pay discount, but all will be expected to pony up by the end of the year.

The federal government has significant reserves, and the state has a little wiggle room, but counties and municipalities have limited reserves to plug into budget gaps. Many but not all school districts have more substantial rainy day funds to tide them over in precarious times such as these.

With the staggering unemployment rate in parts of our five-county area, you know that there are going to be many property-owners who will not have money to pay their real estate taxes even by the end of 2020. Along with that, these same wage-earners pay a 1% earned income tax which is generally shared between the municipality and the school district, so this revenue stream will be shot to heck, too, although some of these jobs will be returning as the state reopens gradually.

There will be the other lost revenue from the 1% real estate transfer tax since real estate activity has largely dried up; the amusement tax, which is a big-ticket item in some municipalities, has dwindled to virtually zero, and assorted licenses and fees associated with activities which have been minimized during the pandemic will be significantly lower compared to budgetary forecasts.

There has been talk about another aid bill in Congress, this time for counties and municipalities, but Republicans and Democrats are still at odds about the specifics, and don’t forget the political component is a major factor, too.

By Bruce Frassinelli | tneditor@tnonline.com