Just as in years past, it is time to dedicate a column to the annual closeout process. Usually, it calls for the closeout funds to be set aside to avoid future tax increases as well as for better budgeting and revenue estimates. But it’s 2020 and nothing is normal.
Every year the County Board over-budgets and over-taxes. According to this year’s report, the County ended Fiscal Year 2020 with $15.6 million in unspent and unobligated funds or 2.5% of department operating budgets. By comparison, last year it was $13.1 million or 2.2%. The schools ended the year with $27 million in unspent budgeted funds which hopefully will be applied to offset this year’s, and next year’s, budget needs.
Revenue generated from taxes, on the other hand, was flat for the first time in recent memory. However, that was mostly driven by COVID-related drops in sales taxes, hotel taxes and meals taxes. Real estate revenue was up by $13 million. And Arlington did receive nearly $20.7 million in federal COVID-19 assistance, about $13 million went toward the 2020 budget.
Each year in recent memory, the County has set aside much of the closeout funds toward the succeeding year’s budget. This year is different. County staff recommends that $13.4 million of the $22.4 million available be set aside for the current fiscal year and just $5 million for FY 2022. Unfortunately, the recommendation did include another $2 million slush fund for the County Manager to spend without coming back to the Board. In this time of COVID, the County Board should not be taking this hands off approach to any spending.
Much continues to be made of as much as a $84-95 million “budget shortfall” for the current fiscal year. However, Arlingtonians should keep in mind that between the general budget and the schools in FY 2020, there was more than $42.5 million in unspent budget. In addition to the $13.4 million in closeout money, County Manager Schwartz also outlined another $19.7 million in money available from the CARES Act, service reductions and debt refinancing. So already the current year gap may be as small as $9 million if actual spending trends continue as they have in previous years.
You may be thinking, this is a good year to have been “conservative” with our budget estimates. But remember, we also have reserves that we have been putting money into for years to account for a “rainy day.” Those reserves total $99.8 million, including $10.2 million for FY 2021 COVID expenses and $4 million to account for FY 2021 revenue declines related to COVID. This $14.2 million likely can be used to eliminate the current gap altogether.
Keeping in mind the unique nature of 2020, Arlington officials are making some strides to tighten up the budget. At the same time, it is safe to say we are nowhere near the need for a huge tax increase or massive spending cuts next year. The Board may take a different view as they are set to unveil the budget guidance for FY 2022 sometime later today. Hopefully it will be taxpayer friendly, realistic, and build in a great deal of flexibility.
Mark Kelly is a long-time Arlington resident, former Arlington GOP Chairman and two-time Republican candidate for Arlington County Board.