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Local Governments Face Steep Budget Shortfalls From Pandemic-Related Tax Losses

Erik Neumann/JPR News

Widespread layoffs means fewer people are making an income, and that could have a devastating impact on Oregon’s major revenue stream: the personal income tax.

That tax accounts for 88 percent of the state’s general fund.

Oregon state economists are working on a budget forecast that won’t be completed until May 20, so the exact financial impact has yet to be calculated. The state is already losing $20 million a week because fewer people are playing the Oregon Lottery on its video machines in restaurants, nearly all of which are closed.

City and county budgets are also expecting steep shortfalls because of decreased tax revenue. For example, the city of Ashland is expecting a budget deficit of at least $1 million, largely because of fewer hotel stays.

“Our lodging tax is a significant component of our general fund, which pays for our public safety operations,” says Interim City Administrator Adam Hanks. “Our police and fire are the biggest two departments in that general fund.”

Some local governments have responded to the financial downturn with layoffs and salary reductions. Ashland has yet to pursue that route.

“Broad stroke implementation of layoffs, furloughs, salary reductions and other similar cost cutting tools are not effective responses to these projected shortfalls,” Hanks wrote to JPR by email. “The City’s management team is evaluating and implementing targeted responses to the revenue shortfalls in the areas of the budget where they are impacting operation.”

The Ashland Parks and Recreation Commission — which operates separately from the city administration — has laid off six employees.

Some Ashland residents have been vocal about the city’s spending, which they say was bloated even before the pandemic hit. Hanks says while the city has a fairly large budget for a city of its size, it also provides many of its own utilities — including electricity, water and an internet fiber network — which require a large body of workers.

The city is currently pursuing an $8.2 million bond through a ballot measure to fund capital improvement projects, including rebuilding city hall; Hanks says the deadline for rescinding ballot measures has long passed. He says the city is also going forward with upgrades to its wastewater treatment plant to come into compliance with state regulations.

April Ehrlich is an editor and reporter at Oregon Public Broadcasting. Previously, she was a news host and reporter at Jefferson Public Radio.