It's not too early for local governments to plan for the aftermath of COVID-19

You know that time between when you drop a paperweight and when it lands on your foot? You know it will hurt, but you don't know how much or for how long. Public agencies are living in that moment right now. The COVID-19 shutdown is certain to increase the amount of services local governments need to provide while reducing revenues.

In the words of Donald Rumsfeld, we are now struggling with a lot of "known unknowns." How long will this crisis last? How hard will local revenues be hit? Will the shutdown trigger a recession, and if so, how severe will it be? What will the impact on stock markets be, and how will that affect California Public Employees' Retirement System (CalPERS) rates?

Now we're learning that restrictions won't be lifted all at once, but in phases, so the impact of economic inactivity will be prolonged. But at what level? My thesis is that we already know enough to begin to act, and the longer we delay, the deeper the ultimate cuts will be.

Revenues decline as spending increases

Let's begin with revenues. On the good news side, the current crisis shouldn't have a significant effect on property taxes and CalPERS payments for nearly two years. The immediate problem will be the more volatile revenue sources like sales taxes, transient occupancy taxes (TOTs), and real estate transfer taxes.