As billions of dollars in federal stimulus funds flow to state and local governments, those responsible are faced with an unusual mystery. How do you maximize a one-time gain when such a large portion of the municipal budget, from salaries to building maintenance, is used for ongoing expenses?
“This is a nice change,” said Hughey Newsome, chief financial officer of Wayne County, Michigan, in a speech at a Thursday briefing organized by the Volcker Alliance. “But the problem is, it’s a one-time inflow of money. We can’t give a raise. And if we make a capital investment, what about maintenance? We’d have to make sure we’re doing something in the operational budget to address the problem. “
The COVID pandemic dealt a blow to budgets managed by Newsome and Mayor Kim Norton of Rochester, Minnesota, who also attended the conference.
Rochester’s economy depends on medical tourists who come to the famous Mayo Clinic – typically 3 million visitors a year, Mayor Norton said. At the start of the pandemic, the city cut $ 100 million from a $ 472 million budget but managed to avoid layoffs. Officials also delayed a tax hike and cut various user fees to help local businesses and households.
In Wayne County, home of Detroit, which had gone bankrupt just five years earlier, Newsome said officials immediately feared the worst. “We have started preparing for a recession like 2008-2009,” he said.
Even if this worst-case scenario didn’t happen, the county was still being beaten up. “When COVID hit, we were still faced with structural budget problems. We have curtailed income and are heavily dependent on property tax income, ”Newsome said.
That means Wayne County’s officials are putting a lot of thought into how to use the bailout money to balance the budget. The county is receiving $ 339 million – compared to a general fund budget of about $ 560 million – and is hoping to get a small portion of the money from the state as well. “We’re trying to be strategic because it’s transformative money,” Newsome said.
In contrast, Rochester will only receive $ 17 million direct, Mayor Norton noted, and “it will be spent to buffer the next five years.” City officials will prefer money for the next few years, which they expect will be the toughest, even as they prepare residents for a small tax hike.
The city continues to place great emphasis on helping those hardest hit during the pandemic, the reopening of the city, and economic development. Rather than using bailouts to directly support small businesses, Rochester is focusing on “getting people outside” to personally support businesses, Mayor Norton said.