The effects of the coronavirus have been substantial to say the least. Lives have been lost, people have become sick, and the long-term effects of the stability of our community are only now being felt.
I know for certain that with the strength and resiliency of our community we will prevail through prayer and support from one another. We are truly in this together.
The emergency declaration has been in effect for a month now with no definitive end date at this point. We are getting a better perspective on the impact on the health of our citizens, the health of medical systems and healthcare professionals, businesses, and the school districts and other governmental entities.
We are seeing a slowdown in the rate of growth of the coronavirus. We are operating below capacity of hospital beds, respirators, and critical care capabilities but that does not mean that we are out of the woods.
Due to the time it takes to restart business, rebuild medical capability, and protect citizens, the long-term planning and solutions must be executed simultaneously with the short-term battles to conquer the virus.
The impact for the state is:
- Revenue shortfalls are expected to be between $3 to $5 Billion between March 15th, 2020 and June 30, 2020.
- Revenue shortfalls of $3 Billion and $6 Billion for the fiscal year starting July 1.
- The budget may be broken into two 6 month budgets due to the uncertainty of the recovery.
- Local government and school district impacts are expected in the state funding received as well as a drop in the earned income tax receipts. The exact magnitude is not clear but estimates as high as a 15% drop in earned income tax for the school districts is very likely.
Recently I had a virtual meeting with Dr. Bernie Kepler and Business Manager Darcy Brenner-Smith, of Palmyra Areas School District to discuss funding concerns, expected shortfalls in the budget and possible courses of action. I had a similar meeting with Lebanon School District.
We indicated that extremely difficult budget choices are going to have to be made and I am encouraging all the school districts and local governments to preserve as much cash as possible to weather the storm. I am concerned that there will be significant budget cuts coming.
I mentioned that we must keep in mind that the people who are paying the property taxes may not have the wherewithal to make the payment. The time is now to preserve cash
We are all going to be in this together. Some extremely painful decisions are going to have to be made by everyone.
In my turnaround management practice as a CPA before getting elected in 2016, I worked with organizations in financial difficulty. Running out of cash is the greatest risk to any organization.
The perspective that taxes can always be raised, that spending can return to normal in abnormal times, that borrowing is always possible will subject the school, the community and the state to very severe alternatives to consider.
I always caution that every dollar you spend is a dollar that cannot be unspent, so preserve cash in unstable times.
Should the coronavirus shutdown continue much longer (I am not opining one way or the other), the potential economic impact will be devastating.
- Pension fund shortfalls due to economic losses in the market are in the billions and will increase the rate paid by school districts on payroll.
- Local school district revenues will decline
- Property taxes will become more of a problem. For instance, at Londonderry Village, property taxes are over $500,000 per year. Increases will affect everyone.
- The federal stimulus dollars will be helpful but will not eliminate the damage.
With all this said, I am optimistic that if we all heed the maintain safe distance standards, minimum contact, protect our vulnerable citizens most likely impacted by the coronavirus, and reopen businesses as soon as safely possible, that we can deal with all of the above.
In the meantime, I recommend that schools, local governments, and all of us preserve as much cash as possible to weather the storm.
To help, I am sponsoring a bill to borrow $5 Billion to be kept as an emergency reserve in the rainy day fund, with severe limits on its use if approved, to preserve our ability at the state, local and school district level to minimize the impact on our citizens as much as possible.
Additionally, we are working with the Federal Government to replenish the Payroll Protection funds which have already been depleted from the last round of stimulus. If anything, that should give us all some pause as to the magnitude of the problem.
Please stay safe. I promise to keep you informed as we get greater clarity.
Frank Ryan, CPA, USMCR (Ret) represents the 101st District in the PA House of Representatives. He is a retired Marine Reserve Colonel, a CPA and specializes in corporate restructuring. He has served on numerous boards of publicly traded and non-profit organizations. He can be reached at frankryanPA101@gmail.com.
Posted on 10 Apr 2020, 13:38 - Category: Op Ed