Baton Rouge – May 7, 2020 – While the health and well-being of our citizens and employees is at the forefront of our efforts at this moment, it is essential that we take steps to manage our financial affairs as well. Our Plan of Government requires the Mayor-President to make adjustments as needed to keep our City-Parish Annual Operating Budget in balance.
I previously instructed the City-Parish Finance Department to prepare an estimate of the effect of this pandemic on our revenue streams. In keeping with our regular budget estimating practices, Dr. James Richardson, John Rhea Alumni Professor of Economics and Public Administration at Louisiana State University has reviewed these estimates. Adjustments have been made based on his recommendations. We are currently estimating a revenue shortfall of appropriately $23 million in the General Fund. These revenues support approximately 7.3% of General Fund appropriations.
Sales taxes, which account for approximately 61% of our budgeted revenue stream, are expected to be approximately $15 million lower than anticipated during the preparation of the 2020 Annual Operating Budget. Please keep in mind that with the 30 day extension of the filing deadline for March sales taxes, we will not have an accounting of actual collections for March and April until the end of May. Our estimates were derived by using various assumptions for sectors impacted by the Stay-at-Home Order. Other material shortfalls include hotel occupancy taxes, gaming revenues, and court related revenues. The attached schedule summarizes the projections.
The portion of the budgets for constitutional offices funded through self-generated court related revenues are also being greatly impacted. The District Attorney has already expressed to me that his office will be short approximately $1.5 million. Since these revenues are collected directly by the constitutional offices, they are not reflected in the City-Parish revenue projection, but I thought that it was important to make you aware of this issue.
The first step that we have taken to balance our 2020 Budget is to institute a hiring freeze on non-essential positions. In addition, we are continuing the work that we started on identifying efficiency savings, and asking our departments and agencies to identify potential revenue sources and grants to cover the cost of providing services. We are also fortunate that we have exercised prudent financial management and maintained rainy day funds and other reserves to help us through extraordinary events. We currently have $15.9 million in our budget stabilization fund and approximately $8 million in Fund Balance Unassigned. We will recommend that a portion of these funds be used to offset our revenue shortfall, but we must be mindful that hurricane season and other issues could arise later this year and we cannot deplete our reserves. We will also be required to replenish these reserves within the next three years making it very difficult to balance budgets for 2021 through 2023.
On the expenditure side we are currently preparing projections that take the hiring freeze into consideration to identify appropriations that can be reduced. We will also have to provide partial funding for the pandemic response. We have been advised that FEMA, through the public assistance program, will reimburse the City-Parish for 75% of our eligible expenses. We are currently monitoring expenses associated with our pandemic response so we can make the necessary submittals for the reimbursement.
As I have stated time and time again, local budgets were not designed to handle the revenue loss or the costs associated with a long-term pandemic battle such as this. While federal grant opportunities provide for reimbursement of a portion of the expenses related to the pandemic response, they do not provide financial relief for loss of revenue. I have communicated with our Congressional Delegation my strong support for expedited federal legislation providing revenue loss assistance. I encourage and ask for your assistance in supporting this effort.
The value of our trained workforce has become even more apparent to me as we respond to this pandemic. We currently do not have any plans to lay off or furlough any of our employees. However, we cannot ignore that the loss in revenue is an estimate and if the actual loss is greater than anticipated, further budget reductions may be required in order to obtain a balanced budget. If the actual revenue loss is greater than anticipated and no revenue relief is forthcoming, these measures will only be taken as a last resort.
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