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May 05

COVID-19 and the Budget

Posted on May 5, 2020 at 3:13 PM by Thomas Reeves

As we all continue to practice safe distancing from one another in this crazy time in which we’re living, I miss seeing all the foot traffic around Tenth Street Place.  I stood out in front of the building (our City Hall) the other day and, looking out onto 11th Street at all the quiet storefronts, I couldn’t help but feel a sense of anxiety over the question of when life will get back to normal.  And yet by now we’ve all come to some level of realization that life won’t simply get back to normal, or at least not the normal we were comfortable with before COVID-19.  

Today Governor Newsom mapped out a general framework for how he anticipates “re-opening” the economy through non-essential businesses.  No one knows for certain how long this pandemic will disturb us, but every economist agrees this pandemic has and will continue to substantially and negatively impact our economy.  

I don’t mind telling you I am concerned about our local economy and the City’s ability to sustain services.  Several of our major revenue categories, including sales tax and transient occupancy tax (hotel tax) have been severely compromised in the current fiscal year, and will continue to be impacted next fiscal year. 

We anticipate falling short of our budget targets, and the loss in revenue will have a significant impact on the City’s year-end financial position.  As we move into estimating potential impacts to the City revenues for Fiscal Year 2020-21 and beyond, the picture becomes less clear.  We know that losses will continue – and make no mistake, the losses are projected to be deep – but to what magnitude is still to be determined.  

You may have heard about potential funding sources in the form of federal stimulus packages. One directly benefits Stanislaus County (The CARES Act) and the other, not yet voted on by Congress, may provide direct funding to cities of our size.  We are closely monitoring and working with our local legislators to express our needs, but it is still too soon to say whether or not either of these sources will directly benefit this city.  

In the midst of this pandemic, the Modesto leadership team is keeping a watchful eye on this year’s budget, and also trying to develop a balanced budget for the next fiscal year.  The impact we are projecting this to have on our current year budget is profound and we are doing all we can to stem the losses in revenue by reducing expenses; I’ve already authorized a spending and hiring freeze through at least the end of June and it will likely continue for the foreseeable future.  

These are uncharted waters we’re all navigating across, and I appreciate your support and understanding.  The COVID-19 virus has caused us all to take a hard look at our own personal and business finances, and I'm sure you would agree that it’s not an enjoyable exercise.  

Change is not always fun, and it’s likely the only thing we can count on during this challenging time, but I am confident in this: change brings growth.  

And I am all for growth.