Nye County Comptroller Savannah Rucker provided the Nye County Commission with an update on its financial situation in light of the novel coronavirus and the outlook is far from rosy, with Rucker reporting that the county is already eyeing a nearly $2 million deficit in revenue versus expenses for this fiscal year.
That trend will continue into the next fiscal year, which begins July 1, and could extend beyond even that, prompting Rucker to notify the commission that they must take action now to curb spending and adjust the budget to account for a steep loss of incoming cash.
However, it is not a complete “doom and gloom” situation, as the county has been through a financial crisis before and the mistakes made during that time have provided valuable lessons that can be used to direct the steps taken now. Management has put into place strategic plans that are hoped to lessen COVID-19’s impact on the county and Rucker is hard at work creating projections to guide the county as it navigates this emergency public health disaster.
“So we do have a lot to talk about and unfortunately, this is not going to be a positive item,” Rucker told the commission on Friday, April 3 during a special teleconference meeting. “At this point in time, we need to accept that uncertainty is inevitable and we need to balance realism with optimism. We’re going to be operating in a resource-deficient time over the next year, possibly two. It just depends on how quickly the economy recovers from this outbreak and crisis.”
Rucker emphasized that the county must take action immediately as a slow reaction could compound the negative impact to the county’s budget. “Now the Nye County general fund does have a significant ending fund balance so I don’t want you guys to think that the world is falling and we can’t pay our bills right now. We can, but we need to react quickly to these changes so we can continue to do business moving forward,” she explained.
Rucker reported that the budget projections and assumptions for fiscal year 2019-2020 are no longer valid and those for fiscal year 2020-2021 are in constant flux due to the ever-changing situation. On the whole, though, there are three potential outcomes to consider, including a swift economic recovery, which is unlikely, a slow recovery or a “black swan” event.
“The black swan event, this is a deep depression, such as 2008. Experts believe that the black swan event needs to be modeled if the quarantine continues and the disease continues to spread. Time will only tell if that’s the case. But at this point in time, I think we should plan for a slow recovery and modify that plan in the event that the disease continues to spread and quarantine continues,” Rucker stated.
She said the immediate concerns are attempting to project revenues which, given the upheaval caused by COVID-19, is extremely difficult. The expectation is that there will be a decline in consolidated tax due to the quarantine, the closure of nonessential businesses and the sharp rise in unemployment. Consolidated tax, made up of sales taxes, cigarette taxes, liquor taxes and basic and supplemental city-county relief taxes, comprise 39 percent of the total general fund revenue.
This is important because the general fund is a good indicator of how other funds will perform into the future.
“A 39 percent budget for consolidated tax in the general fund, that is a significant impact… We did have a surge on sales in March for food and other home goods but that doesn’t outweigh the cost of the loss for sales tax as a result of nonessential businesses closing in mid-March,” Rucker said, later adding that she feels the chance of the Nevada quarantine being extended past April 30 is fairly good and that means an even bigger impact to the county’s coffers.
“I’m concerned about the cash flow for the county… I am also concerned that we are going to see a delay in property tax payments for payments that are deferred until people get back to work,” she informed the commission. Property taxes alone make up 36 percent of the general fund revenue and Rucker said she fears that if unemployment rates remained high into the future, foreclosure rates will also jump, leading to depressed property tax revenue.
On the business front, Rucker remarked that experts are expecting that some businesses will not be able to reopen their doors following the crisis and the economic fallout from less businesses will be long-term. “We’re concerned that tourism in Las Vegas and Nevada is going to lag over a significant period of time. That will effect consolidated tax, room tax, property tax and other sources of revenue in the distant future,” she said.
Many other ripple effects will be seen as well, including a decline in fuel taxes that fund road improvements, possible investment income losses, increases in the county’s Public Employee Retirement System contribution requirements and rises in the liability associated with the county’s other post-employment benefits program, which provides county retirees with health insurance.
“Typically after a health crisis like this, we see health insurance rates go up and health care costs go up,” Rucker detailed, noting that the county could see a 15 to 20 percent increase in those expenses.
“These are all unknowns. They are things we are aware of and we will plan for if they come to fruition,” Rucker said.
As for the county’s employees themselves, Rucker said at the moment many have been shifted to administrative leave pay because they cannot work from their offices, due to social distancing requirements, but the county is endeavoring to create systems so those employees can work from home.
“In this last pay period, 155 of the 445 county employees utilized, admin leave was paid for a portion of their paycheck. However, the county is working toward resolving the tech issues associated with people working remotely, and is getting the team back to work when and where possible,” Rucker explained. “It’s a challenge for management right now but staff is stepping up and management is doing everything it can with the resources that we have to continue county operations as best as possible.”
At this time, the county is already halting all nonessential spending for items such as travel and training, for all county funds. There is a hiring freeze in place so vacant positions will not be filled and internal promotions are to be postponed. Pre-funding for other post-employment benefits is also being stopped for now and new and existing contracts are to be reviewed, with the possibility that some existing contracts may be canceled and new ones denied. Even so, a large financial shortfall is a looming reality.
“We are planning to use the ending fund balance to soften the landing of the COVID-19 crisis. At this point in time, very rough projections show we are about $1.9 million short, meaning we have revenues that are deficit of our expenditures by about $1.9 million… So we need to make the revenues match the expenditures in fiscal year 2020-2021. To do that, we can use ending fund balance but also work toward reduction of department expenditures,” she stated.
If the county fails to take action or if the coronavirus crisis spirals completely out of control, there may be further steps necessary to keep the county functioning, including salary reductions, deferral of salaries and even furloughs, as well as possible outsourcing of needs, downsizing and cuts in service. “Again, we’re not there yet, it’s just something that could potentially be on the horizon if this event goes sideways…” Rucker said.
Not all county spending needs to be stopped, however, as critical capital maintenance must continue to move forward because putting such projects off would only lead to a bigger financial burden down the road. Large construction projects that have already been approved and already have funding earmarked for them should continue, as well.
“The reason for that is, injecting secured cash into the local economy for large capital projects is proven to help local economies mitigate a crisis and come out of recessions quicker. The type of projects I am talking about are road projects funded from existing fuel taxes. Public works is really great about planning their projects for the next several fiscal years and we have funding set aside…” Rucker stated.
The Nye County Emergency Management Department and Nye County Sheriff’s Office are currently tracking all COVID-19 related expenditures and county finance is working with its departments and granting agencies to apply for federal and state support. In fact, at the April 3 meeting the commission approved a letter requesting financial relief from the State of Nevada Department of Public Safety and its State Disaster Relief Fund but whether the state will be able to meet that request is unknown.
Nye County Commission Chairman John Koenig, for one, said his outlook was more dire than Rucker’s, as he does not anticipate much monetary assistance from the federal or state level.
Nye County Commissioner Leo Blundo remarked that he believed it would be easier to make cuts and tighten the county’s belt now rather than waiting until the situation reaches critical mass. Cutting services and supplies would help but he still thought looking into reductions in personnel, which constitutes about 80 percent of the county’s yearly expenses, should be considered as well.
“I appreciate that you are trying to mitigate out of the 20 percent (that goes to services and supplies) but a 1 percent savings in the 80 percent (cost for personnel) is a lot more than 2 percent savings out of the 20 percent,” Blundo stated. “We need to start planning for that now… There is going to be one hell of a ripple effect… We’re taking one hell of a hit.”
“And we are taking action now,” Rucker replied. “The figures that I am quoting you are for the remainder of fiscal year 2019-2020. Fiscal year 2020-2021 will be a completely different ball game because we will be able to start at the beginning of the fiscal year with those numbers… Government services are the result of staff providing services. So let’s cut services and supplies where we can, see where we’re at and if we have to make hard decisions moving forward, then let’s have that conversation. But let me try with services and supplies first, to see what I can do.”
Nye County Commissioner Donna Cox was the only one to express reservations about the crisis, telling her fellow board members and the public that she thought people were making a mountain out of a molehill when it comes to coronavirus.
“I think this could have been handled much better by the governor than it was. I agree that we all need to maybe adhere to the six-feet-away zone and we need to make sure people aren’t coughing on us and we’re not coughing on them. But we’ve all lived through flu seasons …” Cox asserted. However, she did feel cuts were necessary given where the state and country are at the moment and she thanked Rucker for doing everything she is to keep the commission apprised.
Nye County Commissioner Lorinda Wichman, the only commissioner who was on the board when the great recession hit the county in 2008, expressed her gratitude for the early actions taken by Rucker and her staff. “Your preparation and the way you’ve brought this to the county commission is exceptional. And I truly mean that. It is exceptional and the work you’ve done is exceptional. I have every bit of confidence in the world that you and your staff are going to give us a path forward that we can vote on, that will make a difference so we don’t have to suffer the way we did in 2009, 2010 and 2011,” Wichman declared.
Nye County Commissioner Debra Strickland then requested some details on the numbers be broken down for the commissioners to review and Rucker promised that there would be agenda items coming with more information. Strickland noted that the county may want to look into its grants as well, with the idea of possibly putting off some projects that utilize grant funding that comes with a financial match requirement.
“Savannah, I would like to thank you very much. It was a great presentation. I’m not happy with it, but it was a good presentation… The good thing is we are planning the next budget so we can hopefully get that correct but it’s going to be like a Ouija board or throwing darts to try to pick numbers, because we don’t know,” Koenig stated as the item came to a close.
Contact reporter Robin Hebrock at firstname.lastname@example.org