Metro is laying off up to 40% of its workforce and making other budget cuts because of falling revenues caused by the responses to the COVID-19 crisis.
The elected regional government announced Thursday that it is losing $11.1 million a month because its entertainment venues have closed to slow the spread of the novel coronavrus and solid waste collection have fallen because of the economic slowdown.
The cuts are just the first for state and local governments who are seeing their revenues drop as businesses close, employees are laid off, travel is reduced, and recreational activities are curtailed.
The Oregon Legislature is expected to begin confronting the problem during a special session next week.
Up until now, private companies and workers have borne the economic brunt of the COVID-19 restrictions. Hundreds of businesses in the Portland area alone have shut down. Many may never come back, and those that do could struggle for years to make up their losses. Tens of thousands of their former employees will be hard pressed to find new jobs even after pandemic passes.
But the state and local governments also are in for a reckoning. Only the size and timing of the cuts are in dispute, according to elected officials and economists interviewed by the Portland Tribune.
The first official state and city revenue projections are not due for several weeks, however.
"It's still really too early to know for sure, but we could be in for a rough time," said Portland City Economist Josh Harwood.
The fiscal year for most governments runs from the start of July to the end of June. Governments in Oregon currently are operating on fiscal year 2019-20 budgets, which took effect on July 1, 2019, well before the outbreak that has now swept the globe. Most of the revenue in those budgets already has been collected.
Delaying the tax filing deadline from April 15 to June 15 may create short-term cash crunch for the state, however.
"Fortunately, the economy was in a good place before the crisis hit," said Harwood, noting the national, state and local economies were still benefiting from the longest expansion in U.S. history.
But some taxes and fees are collected continuously and reported quarterly.
Much of Metro's revenues come from the operation of the visitor and entertainment venues it operates, including the Oregon Zoo, the Oregon Convention Center, the Portland Expo Center, and several performing arts centers. They all closed after Oregon Gov. Kate Brown limited gathering to no more than 250 people on March 13 — a number she later dropped to 25.
"My goal is to preserve the amazing venues, innovative programs, and ground-breaking initiatives that Metro — that each of you — has created," Metro COO Marissa Madrigal wrote to staff. "And when we've gotten past the worst of this pandemic, when the economy rebounds, you have my word that I
will do everything in my power to bring our most valuable assets, our employees, back to Metro as quickly as I can."
Madrigal also said she is cutting costs by reducing schedules for high income earners across the agency and
asking employees to consider voluntary lay-offs and schedule reductions.
Other examples include the Oregon Lottery, which has already has lost tens of millions of dollars in revenue after terminals were shut down when restaurants and bars were forced to close across the state. The lottery represents the state's second highest source of funds, after income taxes.
State gas tax revenue also is falling as so many people remain largely confined to their homes under Oregon Gov. Kate Brown's recent stay-at-home order.
Metro Councilor Bob Stacey said transient lodging taxes generated by hotel and motel bookings are also down 75%. They are shared with Portland and Multnomah, Washington and Clackamas governments.
User fees paid to Portland Parks & Recreation stopped coming in after community centers and activities were closed. And Portland's temporary 10-cent-per-gallon gas tax also is raising less than expected now because driving has dropped so much.
The potential effect on city revenues will be previewed first when Hardwood releases his next periodic revenue forecast in late April. The forecast will help Mayor Ted Wheeler prepare his proposed budget for the fiscal year, which begins on July 1, 2020. But the forecast cannot predict for certain how far city business income tax revenues could fall next year if many licenses are not renewed because of widespread closures.
State government likely will not know the scope of its problem until the Office of Economic Analysis releases an updated revenue forecast on May 20. That outlook will offer an idea of how much the crisis is expected to eat into the $1.1 billion ending balance that lawmakers have been told to anticipate when the current budget cycle closes.
"We know there will be a slowdown in the data, but all of the data that we have to date indicates everything is fine," said Chris Allanach, the Legislature's top revenue officer. "How things unfold in the next couple weeks will kind of determine it."
Despite the bad news, Harwood is hopeful Oregon and the Portland region can recover quickly once the pandemic is brought under control.
"From all that I can gather, I would imagine that this contraction will be sharper — and hopefully shorter — than most experiences we have had. Every economic cycle and recession is different, and this one is especially so," he said. "Basically, most everything stopped this week, but the faucet can be turned back on pretty quickly if we can get to the other side of the pandemic."
Business leaders seek safety valve
Revenues could fall even further if business organizations get their way, although some declines would not affect ongoing government operations. They are calling for deferring upcoming tax increases to reduce costs during the COVID-19 crisis.
For example, some organizations have urged the City Council to allow businesses to opt out of the 1% income tax that will fund the new voter-approved Clean Energy Fund. It has not yet funded its first green energy project.
Likewise, a coalition of business organizations is urging the Oregon Legislature to allow businesses to defer payment of the new corporate activities tax, which is levied against a business's revenues, not its profits. It is intended to increase statewide school funding by $1 billion per year, but only took effect on the first of the year.
"A corporate activity tax when there is little commercial activity is too great a burden for Oregon employers to bear during a time of crisis," a coalition of business organizations called the Oregon Employer Community wrote the Oregon Legislature on Thursday, March 26.
Oregon Public Broadcasting is a news partner of the Portland Tribune and contributed to this story.
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