Coronawatch: City budgets feel sharp drop in tax revenues from the pandemic

Real estate professionals have been saying this since the lockdown entered its second month: the necessary lockdown to address pandemic is going to cause a budget shortfall through a combination of reduced revenues and increased expenses. And there are two ways that most cities are going to address this, either by raising taxes and fees, or by cutting services. Or both.

Infrastructure and city services are seeing the first round of budget cuts. The Guardian reported that New York City was faced with a $9 billion deficit – so far – and has cut $5 billion from the city's budget. Funding for the city's beloved composting program was almost entirely eliminated. We will likely see reduced trash pickup (particularly in less affluent neighborhoods), reduced frequency of trains (the MTA's budget shortfall is exacerbated by the low levels of ridership and steep drop in revenue) and higher fares.

New York City's fiscal challenges as a result of the coronavirus are a microcosm of those facing the United States at large. Per the Guardian, "With falling personal income tax and sales tax revenue, state budgets are looking at an estimated $500bn shortfall over the next two years. Local budgets are not looking bright either: nearly all cities with populations over 50,000 are expecting revenue shortfalls this year." According to NPR, some states have lost a quarter to a third of their annual revenues, year over year.

Another area of likely budget cuts will be education and social services. Florida cut $1 billion in spending from these sectors, as did Georgia from K-12 education funding.

Unlike many other developed countries, the United States relies on a roughly equal split between state dollars and local real estate taxes to fund a significant portion of school budgets. This has translated into less support for schools in poorer (translate: often more diverse) neighborhoods.