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ANALYSIS: POTENTIAL DROP IN SALES TAX REVENUE COULD RESULT IN TENS OF MILLIONS OF DOLLARS IN LOSSES


Modified: March 20, 2020 11:54am
Created: March 20, 2020 11:54am

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March 20, 2020

(ERIE COUNTY, NY) – Erie County Comptroller Stefan I. Mychajliw is warning county lawmakers that the Coronavirus pandemic could have a devastating impact on county finances with a potentially drastic drop in sales tax revenue.

 In a letter sent to the Erie County Executive and the Legislature, the Comptroller provided projections through June for “best and worst-case scenarios” depending on the percentage of sales tax reduction.  If the county were to lose 10% in sales tax revenue during that quarter, it would equate to a loss of $16 million in revenue to the County of Erie.  But should that loss in sales tax revenue climb to as much as 50%, the impact could be catastrophic to the tune of $80 million loss of revenue.

 “As Erie County’s Chief Fiscal Officer, it is important to keep lawmakers apprised of where we stand.   Revenue we rely on may not materialize.  Businesses are hurting.  Workers are feeling the pain.  Taxpayers are struggling to make ends meet.  This pandemic could strike a significant blow to Erie County finances,” said Comptroller Mychajliw.

 If sales tax for the month of March 2020 dips by these percentages, here’s what the loss could be:

 •             10% reduction: loss of $ 3,586,406

 •             20% reduction: loss of $ 7,172,811

 •             30% reduction: loss of $10,759,217

 •             40% reduction: loss of $14,345,623

 •             50% reduction: loss of $17,932,029

 If sales tax for the month of April 2020 dips by these percentages, here’s what the loss could be:

 •             10% reduction: loss of $ 3,583,050

 •             20% reduction: loss of $ 7,166,100

 •             30% reduction: loss of $10,749,151

 •             40% reduction: loss of $14,332,201

 •             50% reduction: loss of $17,915,251

 

If sales tax for the month of May 2020 dips by these percentages, here’s what the loss could be:

 •             10% reduction: loss of $ 4,904,305

 •             20% reduction: loss of $ 9,808,609

 •             30% reduction: loss of $14,712,914

 •             40% reduction: loss of $19,617,219

 •             50% reduction: loss of $24,521,524

 

If sales tax for the month of June 2020 dips by these percentages, here’s what the loss could be:

 •             10% reduction: loss of $ 3,917,876

 •             20% reduction: loss of $ 7,835,752

 •             30% reduction: loss of $11,753,629

 •             40% reduction: loss of $15,671,505

 •             50% reduction: loss of $19,589,381

 

 “While the Office of Erie County Comptroller is responsible for cash flow management, we can only manage the amount of cash provided to us.  We could see a return to drastic action taken during the ‘Red/Green Budget Crisis’ where bills can no longer be paid, and Erie County would be forced to prioritize who gets paid and who does not,” added Comptroller Mychajliw.

 

Sales tax revenue is the primary source of funding for much of Erie County’s budget.  It is the funding stream lawmakers rely on for libraries, cultural organizations, road work, Sheriff’s road patrol and numerous other operations. 

 

When restaurants and bars close, when salons and businesses close, when no sales tax revenue is being generated, it could have significant and severe consequences for Erie County.

 “We will help lawmakers any way we can.  Making them aware of all the possible scenarios helps the county plan for what the future may bring, no matter how bad the fiscal pain is going to be.  We are in uncharted territory.  I urge Erie County government to plan for a possible deficit, the amount of which remains unknown.   Cost cutting and most important, cost saving measures to save taxpayer dollars should be considered,” concluded Comptroller Mychajliw.

 

For a copy of the letter click here.

  

 

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