New York Municipal Governments and COVID-19: Important Financial and Accounting Considerations for 2021

Covid-19 - Looking Towards 2021

Eight months into the global COVID-19 pandemic, local governments in New York are faced with bad news and good news:

On one hand, a new rise in case numbers, and little movement on legislation to help municipalities weather the fiscal fallout of the ongoing pandemic; and on the other hand, the development of two vaccines and improved treatments for the virus.

Local government has a hard road ahead in 2021. Local leaders will likely have to dip into fund balance even more than in 2020, and may face yet another round of belt-tightening. A number of federal relief programs for individuals and businesses are slated to end with 2020. Late last month, the New York State Division of the Budget released its mid-year report, projecting a General Fund revenue decline of $14.9 billion and a tax receipts decline of 15.3 percent from February 2020 projections.

The non-partisan Center on Budget and Policy Priorities projects that New York will see a $16 billion decline in tax revenues for 2022, representing a 17 percent decline from pre-COVID revenue projections.

Some of 2020’s severe measures may ease the stresses a little in the coming year.

Where municipalities used retirement or separation incentives to reduce staff, they may see continuing personnel cost reductions, the goal of the incentives.

However, municipalities may still face rising personnel costs due to the pandemic’s effect on the state’s Common Retirement Fund, which pays for the state Employees Retirement System and the state Police and Fire Retirement System. The market reaction to COVID-19 and the shutdown meant a lower return on investment for the fund earlier in the year, and higher contributions from municipal employers for 2021.

The New York State Comptroller’s Office projects that the employer contribution will rise again in 2022.

Deep in local budget season, many municipalities are reckoning with what new measures they might have to consider next year.

What is a supervisor or mayor to do? Start with the basics.

Monitor budgets more frequently and more carefully throughout the year; analyze trends as you go so you can make changes, anticipate issues and not be taken by surprise.

If there is a big lesson of the pandemic, it’s the need for solid, well-thought-out budget and fund balance policies, grounded in data and based on an approach that balances the effects on services, municipal staff, and taxpayers.

A local government that has analyzed its policies, its demographics, its services and its needs can then find creative ways to economize and to generate new revenues.

We have offered suggestions over the past several weeks.

  • Develop a sound fund balance policy and plan.
  • Independent budget reviews may help guide your decisions, and help officials make non-political recommendations.
  • Consider issuing short-term debt to raise cash.
  • Consider early retirement incentives if you haven’t already done so
  • Is it feasible for your municipality to share services with a neighboring community? Combining forces could lead to savings.
  • Would an improvement district, such as a Business Improvement District, allow you to provide better services in a downtown area without raising taxes on residents outside that neighborhood?
  • Are your service fee structures and development fees where they should be? Are the people who benefit the ones paying for the services?
  • Will outsourcing your accounting services provide expert attention to your municipal books while allowing employees to better serve your residents?

Not so long ago, local government officials could get away with just passing a budget, letting things run on their own, and then perhaps, being surprised about where things stood when the new budget process began.

COVID-19 has taught us that leaders must pay more attention than in the past, and it has taught us that resilience is key to weathering difficult times. Care, close attention and sound data-based strategies are key to handling the challenges COVID-19 will continue to bring in 2021.

Hectic Holiday Headache for Higher Education

College Students with Masks

This Thanksgiving break week, students will honor the longstanding tradition of packing up their laptops, books and duffle bags and heading home by carpool, bus or plane.

From loud, bustling arenas of study and socializing, campuses will transform into quiet and empty dorms, cafeteria halls and libraries. Students will look forward to swapping their go-to staples like Cup O’Noodles and energy drinks with a home cooked turkey dinner. The main difference? While it’s typical for students to return to school between Thanksgiving and winter break, many schools are forbidding it, to curb the spread of Covid-19. While there is no singular approach, let’s consider what experts recommend and explore some of the ways New York campuses are handling this crucial decision.

More colleges have altered their fall instructional plans in the last week than at any time since August.

According to Inside Higher Ed’s database and map of changes in colleges’ fall reopening plans. That’s likely because according to the CDC, more than 1 million new Covid-19 cases were reported in the US over the past seven days. Unsurprisingly, college campuses have emerged as hotbeds of infection, accounting for more than 252,000 infections and at least 80 known deaths. The primary concern is that asymptomatic students may unknowingly carry the virus home over the holiday, putting families in a precarious position – as many colleges are opting to require students to leave campus before Thanksgiving and not return until winter break ends. Instead of resuming hybrid or in-person lessons, many students across New York will partake in 100% remote learning and complete finals from home.

In a recent brief, the American College Health Association issued some advice to colleges that will continue in-person instruction after Thanksgiving break.

ACHA advises in-person institutions to encourage students to stay on campus over the holiday rather than traveling to and from their neighborhoods, which creates unnecessary risk for increased Covid-19 transmission. Alternatively, they suggest students hold virtual celebrations with family and opt to hold a “Friendsgiving” with other students in their close circles.

We would like to highlight one exceptionally coordinated effort we believe other universities could successfully model:

State University of New York (SUNY) schools will now require “all students using on-campus facilities in any capacity” to test negative for the virus within 10 days of their departure, and to quarantine according to county health rules if they test positive, whether they are on or off-campus. The plan will entail testing about 140,000 students at SUNY’s 64 colleges and universities. In a press release explaining the strategy, SUNY Chancellor Jim Malatras describes the move as sensible. “By requiring all students to test negative before leaving, we are implementing a smart, sensible policy that protects students’ families and hometown communities and drastically reduces the chances of COVID-19 community spread,” said Malatras.

Because very few campus decisions are coordinated statewide, there is an expectation that communities across New York will experience a challenging spike in Covid-19 cases over the next 10 day period.

Regardless of how your institution plans on operating over the next several weeks, officials should make campus accommodations available for those who do not wish to travel home. Additionally, we recommend the latest CDC guidelines be made immediately available for students, and that staff should offer ample supportive resources to promote student mental health wellness.