As each day passes, we get closer to the day the economy opens back up. At some point in the future, we will get back to relative normalcy. The road between here and there might be bumpy. We are seeing things we never imagined could be possible. Here are a few things you may not have thought of.
Every government agency runs on a budget. Most of their budgets are generated from tax revenues. This includes city, county, state and federal agencies. Most agencies do not carry huge reserves in their accounts. They may carry about three months of expenses in reserves, and plan on collecting taxes the following quarter to replenish the account.
COVID-19 has created an economic slowdown. Consumers are not spending nearly as much money. Sales tax revenues are down, as are gas sales tax. Even the due date to pay federal income taxes was extended. Meanwhile, government expenses for unemployment, food stamps and other social subsidies are way up.
It is the perfect storm. The entire government could find themselves in stormy seas.
Imagine a local city that runs out of money. They would be forced to eliminate non-essential services, and maybe even essential services like police and fire. They would pass those responsibilities on to the county.
The county does not have the financial resources, so they would be forced to stop providing services. These responsibilities would fall upon the state. The state would be forced to reach out to the federal government for help.
The federal government could not afford to carry every state, they would be forced to pick and chose. How would they select which ones they support? What if you are not a resident of that state? How would that affect your business? What can you do now to plan for it just in case?
The business news you need
With a weekly newsletter looking back at local history.