With the state moving into Stage Two of recovery and allowing more businesses to reopen this week, Nevada County officials say the economic fallout of the COVID-19 pandemic is not expected to bring cuts to county staffing levels or essential services in the near future.

Instead, the county will look to reduce expenditures 5-10% across all departments, Board of Supervisors chairwoman Heidi Hall said, in an attempt to account for a projected 30-40% loss in economic activity dependent tax revenue over the next four to six months.

The county projected 2019-20 sales tax revenue to be more than $4 million, meaning the county could miss out on about $800,000 in revenue over the rest of the year, which according to the budget would fund projects like road engineering, transit services, social services, and health and human services.

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According to Chief Fiscal Officer Martin Polt, the county has the ability to approach its immediate economic challenges thoughtfully thanks to disciplined fiscal planning since the Great Recession, including reducing the county’s workforce from 986 full-time equivalent employees in 2007-08 to 801 today.

“… the county is anticipating adjustments to expenditures and use of some fund balances that have been built up for these difficult times.” — Martin Polt, Nevada County chief fiscal officer

However, in the last decade the county has increasingly relied on general fund revenue, funded through local taxes, to support critical programs in core departments, budget documents state.

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The county is preparing an updated budget that will go before supervisors next month that will address potential shortfalls from the impact of COVID-19.

“During these financially uncertain times and the economic impacts due to the COVID-19 pandemic, the county is anticipating adjustments to expenditures and use of some fund balances that have been built up for these difficult times,” Polt said in a statement.

While in the next two fiscal quarters sales, gas and transient occupancy tax revenue may decline, Polt said pension costs, projected to reach $30 million in the next four years, and the possibility of diminishing property taxes are perilous concerns in the long run.

CONCERNS

In the 2019-20 budget, property tax revenues at $46 million accounted for more than 18% of the county’s total funding, the second-largest revenue source next to state and federal allocations.

During the last recession, which officially began December 2007, property tax revenues were not affected immediately, with the county seeing revenues continue to increase until the 2010-11 fiscal year when they fell to $35.13 million from $37.63 million the previous year.

The next year property tax revenues fell 7.5%, resulting in a $5.5 million deficit which led the county to eliminate 32 positions after cutting 64 in the two years before.

According to the California Department of Finance Spring Outlook, in the next year median home prices could fall anywhere from 0.7-5.7%, with the a potential resurgence of COVID-19 cases and consumer confidence being driving variables.

The outlook describes fiscal challenges likely to persist for years, with state deficits projected into 2023-24 even in the most conservative estimates with a full return to economic activity by the end of the summer.

The report suggests dramatic cuts to school and county government funding could be considered if the state does not receive enough federal help to pay for things like state health programs. More than 40% of the county’s revenue — $102,543,021 — comes from federal and state sources, which helps fund departments like elections, community development, environmental health, and public safety.

The outlook also predicts unemployment rising to between 9-11% and wages decreasing 5-8% in 2021.

Gov. Gavin Newsom will release his budget revisions Thursday, which are expected to reveal a $54 billion deficit after beginning the year with a $5.6 billion surplus. The revision will inform the county’s update.

“There remains significant uncertainty about how long and deep this recession will be,” Polt said.

To contact Staff Writer John Orona, email jorona@theunion.com or call 530-477-4229.