As tax revenues across the country drop due to the coronavirus pandemic, local officials are grappling with how to respond, but are being forced to wait until Congress decides on a possible stimulus package for state and local governments.
In Johnston, Mayor Joe Polisena said that making sure his town gets level-funding on state aid is key to prevent tax increases or loss in services for residents.
“If they cut the school aid, it’s going to cause a tax increase,” said Polisena, who stressed that the General Assembly has a responsibility to local taxpayers to ensure municipalities are funded appropriately. He said that Johnston would be able to weather a decrease in local revenues without raising taxes, but not a change in state aid.
“All politics are local,” Polisena said. “The taxpayers are counting on members of the Johnston delegation to make sure that we are level-funded.”
Polisena said that he was sending a letter to members of the Johnston delegation in the General Assembly, asking them to level-fund Johnston’s state aid payments.
In an emailed statement, Warwick Mayor Joseph Solomon said his city is facing significant declines in anticipated revenue, especially from losses in the tourism and hospitality industries.
“I am committed to making sure we don’t increase the burden on our taxpayers, many of whom are struggling right now,” Solomon said. “Many of our local businesses have been severely impacted, and many local residents are out of work. We can’t ask them to pay more when they’re already dealing with so much.”
“Cranston is one of many municipalities that has already started making cuts as we prepare our budgets for next year,” Cranston Mayor Allan Fung said in a press release from the Rhode Island League of Cities and Towns. “If the state short changes cities and towns in terms of educational and municipal aid, we will be forced to make drastic cuts to our services for seniors, cut vital educational programs for our children in our schools, layoff or furlough more staff, and reduce our ability for our first responders to respond to these heightened COVID-19 demands.”
The RI League of Cities and Towns, the lobbying group for state municipalities, stressed in a press release that funding from the state for education and municipal aid should stay constant, to avoid putting additional fiscal burdens on local taxpayers. The League asked that the state level-fund the education funding formula, the payments in lieu of taxes program, funding for Distressed Communities, and continue with car tax reimbursements.
However, the power to level-fund the needs of cities and towns lies outside the control of municipal officials. State aid payments are determined by the General Assembly, but state leaders said work on the state budget couldn’t begin until information concerning loss of revenue and a possible stimulus from the federal government became clearer.
A meeting of the Revenue Estimating Conference, made up of finance experts from the General Assembly and governor’s office, found that state revenues could drop as much as $800 million dollars over the next two-year fiscal period. That’s nearly a 10-percent drop from the state revenues estimated last November. House Majority Leader Joe Shekarchi, representing Warwick, stressed that these revenue numbers are estimates, and that state leaders are still waiting for clearer information on state caseloads, Rhode Islanders in programs such as unemployment insurance.
“The biggest unknown is that we’re hoping on a stimulus package, and [U.S. Sen.] Jack Reed is working diligently on that,” Shekarchi said. “So we don’t know what our budget will look like because the federal aid component is a big piece of that unknown.” He said that he was hopeful the picture would be clearer once Congress decided on the next stimulus package, around Memorial Day, on May 25.
Last Friday, Reed introduced the State and Local Emergency Stabilization Fund Act in the U.S. Senate. According to a press release, the proposed bill would allow states to use money already received via the CARES Act, $1.2 billion in Rhode Island’s case, to cover qualifying losses in revenue. Currently, the money received via the CARES Act can only go towards coronavirus related expenses, not losses in revenue. The bill would also appropriate $600 billion in new funds towards assisting local and state governments cover revenue losses.
Larry Berman, communication director for House Speaker Nicholas Mattiello, said in an email that Mattiello was aware of the worries of local leaders, but more information was needed about a possible stimulus package from the federal government. If there were no additional federal stimulus, he said, “the state budget picture is very grim.”
“I think it’s fantastic,” Polisena said about the proposed federal bill. “If I could give Sen. Reed a medal, I would, but is it going to pass? We don’t know that. Congress should be deeply concerned about all the cities and states.”