Coronavirus upends Clark County budget; estimated $1B revenue loss

The coronavirus crisis has carved a deep hole into Clark County finances, flipping once rosy projections upside down and forcing officials to scramble to cover a $315 million shortfall for the upcoming fiscal year.

Prior to the pandemic, the county had projected $1.57 billion in general fund revenues, but statewide business closures to contain the viral outbreak have caused that projection to drop to roughly $1.26 billion, according to a presentation Tuesday by Chief Financial Officer Jessica Colvin.

Colvin said that officials were able to close the gap to $128 million with one-time moves she likened to using a Band-Aid: reducing general fund reserves by $69 million, eliminating $36 million of capital transfers, and cutting back more than $38 million for the Clark County Detention Center, Metropolitan Police Department and University Medical Center.

To reach a balanced budget, which governments are legally obligated to do, the county’s finance department recommended further savings by reducing or canceling discretionary capital fund balances and enacting a hiring freeze and voluntary separation and furlough programs.

“And with pretty much almost every tool we have that we could think of to put against this $315 million structural imbalance, we still are remaining short by $58.4 million,” Colvin said.

The remaining shortfall, she added, could be covered by reducing salaries and benefits for county employees by 11 percent or eliminating 11 percent of the workforce, which equates to roughly 580 mostly unionized employees.

“The goal is to have as much in concession as possible before looking to an elimination of positions,” she said.

It represents just one of many tough realities for county lawmakers before the budget is approved in the weeks to come as $344 million in reserves are projected to dwindle to nearly nothing by October and the prospect of losing hundreds of police officers in a few years hangs overhead.

If general fund revenues in fiscal 2022 do not increase over what is budgeted in the upcoming year’s spending plan, county officials will need to cut $152.3 million in expenses next year, Colvin said.

“A structural imbalance represents we’re starting behind or in the hole for next year,” she said. “So as we are building this budget and resolving the budget shortfall, we need to keep in mind the future.”

Big losses

In one illustration of how seriously the pandemic has struck the county, officials estimated losing more than $1 billion in revenue over the next 16 months, nearly $343 million of which stems from the county’s general fund.

That projection includes an estimated $259.1 million loss in consolidated tax, which Colvin said was principally sales tax, noting that it took six years to recover during the throes of the Great Recession.

“It’s not unimaginable to consider a possible four-year recovery in this area,” she said.

Consolidated tax revenues, once projected to be $453 million for the coming fiscal year and the highest since at least 2007, are now forecast to be about $292 million, which would be the lowest since 2013, according to the presentation.

‘They’re looking at us for hope’

Room tax, gaming license and other license and permit fees are expected to dip below $200 million for the first time since at least 2007, the presentation showed. Projections for room tax and gaming license revenue between March and June have slid more than 81 percent and 72 percent, respectively.

County lawmakers anticipate receiving federal stimulus funding to cover virus-related costs, but they said current legislation spells out that the money cannot be used to supplement general revenue losses.

Commissioner Lawrence Weekly urged creativity and positivity, reflecting on how the county made it out of the last financial emergency a decade ago. And he said it was important to be honest with constituents.

“They’re looking at us for hope,” Weekly said. “And hell, if we throw in the towel, what do we expect from them?”

Contact Shea Johnson at sjohnson@reviewjournal.com or 702-383-0272. Follow @Shea_LVRJ on Twitter.