HUTCHINSON, Kan. — Hutchinson City Manager John Deardoff warned the Hutchinson City Council that this year’s budget cycle will be difficult because of the economic slowdown connected to the COVID-19 outbreak.
“Obviously we’ve seen this coming and we’ve really been spending a lot of time and focusing some time on what impact this COVID-19 is going to have on our municipal finance,” Deardoff said. “The obvious impact for us is sales tax. It represents 35% of our general fund.”
Deardoff said that, while the numbers look good for now, it will be some time down the road before the city starts to see the full impact of the downturn.
“We lag two months in our retail recipients so we probably won’t see any impact until May (or) June,” Deardoff noted. “The question is how big of an impact is it going to be.”
Deardoff noted that the budget downturn will be similar to the recession in 2008 and 2009, but hopes there will be one significant difference.
“We’re hopeful that what we’re dealing with now is going to be short-lived, but nonetheless we’ve got to prepare for that,” Deardoff said. “Obviously as we get into the 2021 budget . . . reducing our fund balance just makes it even more challenging when we start looking at 2021.”
The end fund balance is the amount of funds held in reserve in case of a natural disaster or something else that interrupts government services. The city has been working to increase that balance for both security and the benefits it brings when projects are bonded.
Deardoff also commented on whether help for cities and counties might come from the state legislature in the form of more leeway in generating revenue such as lifting the tax lid or some other legislation.
“What’s really interesting about that is under the new bill that seems to have a lot of momentum and will likely be approved this year is the Budget Transparency Bill and it would eliminate it (the tax lid) and would require us to spend a little more time on notification to all taxpayers as to what any proposed increase would be.”
Deardoff said he will be meeting with department heads this week to see where cuts can be made to the budget to prepare for the financial difficulties that lie ahead. He noted that the city has prepared for a budget with reductions ranging from 7.5% to 15%.