The June California Legislative Update covers the passage of the state budget and a number of bills related to the CARES Act. staff is currently monitoring 15 bills that seek to modify existing local taxes and impose new fees. This update provides the latest information on this legislation as well.
On June 15th, the Legislature passed the State Budget Act for the 2020-21 fiscal year. Our understanding is that the Legislature and Administration have not yet reached a final agreement; however, they have agreed to continue discussions and keep working on a compromise. The Budget Act and two trailer bills were sent to the governor and are further described in this report.
Governor’s Office of Business and Economic Development: The Legislature’s budget approves a total of $100 million to support the California Infrastructure and Economic Development Bank’s loan guarantee program that provides financial assistance to small businesses.
Revenues: The provisions of AB 85 include a total General Fund benefit of approximately $4.4 billion in the 2020-21 fiscal year.
Read the full June California Legislative Update Here.
CLIENT UPDATE #1: Sales and Use Tax: Avenu has been hard at work developing economic assumptions on which to build revenue projections for each of our clients. For many of our clients, Sales and Use Tax is a primary revenue source and one that currently is in a state of flux. The pandemic has caused reduced economic activity, business closures, and uncertainty about the future. The recent Sales Tax Executive Order from Governor Newsom also impacted sales tax cash flows. This communication is intended to explain the lower than normal first quarter 2020 allocations to local governments resulting from the pandemic and the Governor’s Executive Order.
Sales and Use Tax Liabilities Deferred by CDTFA:
Extension Program: On April 2, 2020, Governor Newsom issued Executive Order N-40-20 that allowed businesses with under $1M in tax liability to delay their first quarter sales and use tax filings for 90 days. This action means that first quarter filings for these businesses, normally required by the end of April, could be delayed until the end of July.
Deferral Program: Another state program allows small businesses ($5M or less in taxable sales) to defer up to $50,000 of their sales and use tax liabilities until next fiscal year. For those who request the deferral, the owed amount would be payable in twelve equal installments over the following year and would not be subject to interest or penalties as long as these payments are made. The payments will start in August 2020 and they will not extend beyond July 31, 2021.
Key takeaways regarding budgeting and how to approach the unknown amid the current COVID-19 crisis
Cities across the country are deep into the preparation of their FY2021 budgets, a job that is difficult in the best of circumstances for both City Managers and Finance professionals. However, under the current pandemic conditions, it is seriously daunting and looks almost impossible. This is particularly true for those jurisdictions preparing multi-year projections. The first challenge is doing the projections at all. The second challenge is working with your elected officials, bargaining groups, and community to accept them!
So how do cities prepare budgets in these radically uncertain times?
The key is the assumptions underlying the numbers. In any crisis management challenge, accurate information is critical. However, the more turbulent and uncertain the environment in which the budget has to be developed, the greater the importance of collecting broad data to support grounding assumptions; and the more critical it becomes for staff to share that supporting data and their related analysis with their elected officials.
That brings us to COVID-19 and the unknowns of the rapidly evolving economic landscape. While all cities currently share the same general uncertainty, each community is, in fact, unique. They are different in size. Their business community mix may be very different than the adjacent communities. Their social priorities may vary widely. Their ability to deliver services, and the type of services they deliver, may differ. Their population may be younger or older than other communities. So, while certain assumptions may apply across all of them, others are going to be unique to each community.
With this in mind, how does each city approach budget development?
There are four areas that any city must now consider when building their FY2021 budgets (particularly when building Year One of a multi-year budget), although how they gather information and the resulting assumptions they make may vary widely:
Download our recent White Paper: Budgeting in a Sea of Unknowns to read more as we outline ways to approach budgeting in these uncertain times.
The Coronavirus (COVID-19) pandemic is a fluid situation that has everyone on alert. Avenu’s number one concern is maintaining the health and well-being of both our customers and employees, while continuing to ensure the continuity of all business services.
As you are aware, an expanding number of government agencies and commercial businesses are taking steps to impose curfews, ban large gatherings, regulate travel and enact other restrictions that are reasonable and necessary to protect public health and the welfare of their citizens and employees.
Avenu is no exception.
Here are the steps Avenu is currently taking:
It’s important for you to know that we are closely monitoring the situation and prepared to further activate our Disaster Recovery, Business Continuity, Visitor Access and Pandemic Management plans in the event more action is needed.
This is a unique time in history, and we are hopeful that the proactive actions by everyone around the world will help reduce further illness and disruption. We sincerely wish you, your families, employees and citizens the best of health.