Henrico anticipates loss of $99M in revenues in coming fiscal year

Henrico County officials anticipate a decrease of $60 million in tax revenue in the fourth quarter of the current fiscal year and another $99 million in losses during the coming fiscal year (which begins July 1), County Manager John Vithoulkas said this morning.

Vithoulkas will present a revised budget proposal to the county’s Board of Supervisors tonight and is recommending that instead of adopting a budget in two weeks, the board delay adoption until May 12 to allow for more public feedback on the proposal.

Officials intend to adopt a budget for the new fiscal year in quarterly installments, given the economic uncertainties caused by the COVID-19 outbreak, Vithoulkas and Deputy Henrico Finance Director Meghan Coates indicated. County officials estimate that about 16,000 Henrico citizens are currently unemployed – many having lost jobs in the hospitality and tourism industry. Vithoulkas estimated Henrico’s current unemployment rate at 8 percent.

The county reported about 193,000 jobs a month ago, but as of last Thursday, more than 11,000 citizens had filed for unemployment during the most recent three-week period. (State officials will release another update this Thursday.)

His revised budget proposal won’t include the 3-percent pay raise for eligible employees that he had proposed last month but also doesn’t currently include any layoffs, though Coates suggested some may need to be considered in order to close the remaining $12.8 million funding gap between the original proposed budget and the revised proposal.

Vithoulkas estimated that funding earmarked for schools from the county’s meals tax and state aid would decline by $27 million in the coming fiscal year from anticipated levels – but he said that he wouldn’t reduce funding to the school system by that much.

Instead, he said, his revised proposal would ask general government operations to take on 90 percent of the funding reductions while proposing that schools absorb just 0.9 percent. The school system’s overall slice of the general fund budget actually would increase from 56 percent in the original budget proposal to 57 percent in the revised version, Coates said.

In an email to school employees this afternoon, Superintendent Amy Cashwell outlined a number of possible areas from which cuts could come.

Vithoulkas pledged to make decisions with the best interests of county citizens in mind – and he urged them to contact the county with feedback by emailing budgetfeedback@henrico.us.

“You carry the weight of our work in your wallets, and it’s our responsibly and our duty to mitigate the impact of this economic downturn while continuing to provide the highest level of service,” he said. “We cannot and will not pass along a burden to our businesses and residents who may not know the next time that they will have a steady income.”

Coates suggested that a lag time in economic data reporting – typically one to two months – makes it difficult for officials to grasp the county’s economic health in real time.

“The impact of this event is still extremely hard for us to measure,” she said.

But, she expressed for the second time in three weeks her belief that the economic pattern would follow a V-shape – a quick and precipitous dive, followed by an equally quick rebound.

Given the uncertainty and how quickly things could change week by week, county officials intend to undertake a constant budget review.

“We will be budgeting basically every 30 days for the next 12 to 18 months,” she said.

All new spending on capital projects that was proposed in the original budget for FY 2021 has been paused but could be brought back into the plan on a piece by piece basis, should the county’s economic justify that, Coates indicated.

Officials will budget with the assumption that Henrico will not receive any relief funds from the state or federal government, Coates said, and they’ll do so using a worst-case scenario.

“We’re trying to start from what we think is the lowest of lows,” she said.