November 2020 - Parks & Recreation - 16

RESEARCH
Falling Tax Revenues Aﬀect
Park and Recreation Budgets
By Kevin Roth

eventeen and one-tenth percent: that is how much state and local
tax revenues plummeted this spring in the face of the coronavirus
(COVID-19) pandemic and the resulting recession. In September,
the U.S. Census Bureau released its Quarterly Summary of State
and Local Tax Revenue (tinyurl.com/y67ewhn5) data for the second quarter of 2020, and the picture it painted was not pretty.
State and local governments' tax
revenues totaled $335.1 billion between April and June of this year,
down 17.1 percent from $404 billion
collected during quarter one. These
are " seasonally adjusted " estimates,
in which the Census Bureau controls for the seasonal variations
one sees typically with tax revenues
during different times of the year
(e.g., tax payment deadlines and differing consumer spending patterns).
State and local tax revenues also
were off 20.9 percent from the same
quarter a year earlier, the largest yearto-year percentage decline in state
and local government revenues going
back to at least 1993. By comparison, tax revenues had been growing,
on average, 4.5 percent year-to-year
since 2012. Further, the largest yearto-year decline from the 2007 to 2009
Great Recession was a 16.7 percent
drop in 2011, two years after the U.S.
economy had resumed growing. The
most significant tax drop resulting
from the 2001 recession was a relatively modest 2.3 percent.
In 2020, quarter two revenues
fell across every significant tax
category, albeit at vastly different
rates. Consumer spending dropped
sharply, the result of both rising
unemployment and governmentmandated shutdowns. As a result,

Parks & Recreation

sales tax revenues slumped 16.2
percent during the quarter. Property tax collections held relatively
stable this past spring, slipping 2.2
percent. In quarter two, individual and corporate income tax revenues were down 37.2 percent and
47.3 percent, respectively, from the
same three months in 2019.
Some of the state and local government tax revenue decline was
due to the delay of this year's income tax filing deadline from April
15 to July 15. Some of the " lost "
income tax revenue will simply reappear in the quarter three tax data.
But with millions of people who
have lost their jobs, been furloughed
and/or suffered a pay cut, income
tax revenues will remain challenging for some time. Similarly, falling
business income and companies
going out of business will suppress
corporate income tax revenues.
Some of these tax revenues likely
will recover relatively quickly (e.g.,
some sales tax categories). Others
perhaps have not yet reached their
lows for this recession (e.g., property tax revenues). Further, each location's situation is unique, each experiencing varying impacts from the
public health crisis and recession and
having different tax structures.
Regardless of this variability, the

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COVID-19 pandemic and resulting
recession had a sudden, sharp detrimental impact on state and local
government tax revenues. There is
little evidence that quarter two represents the " bottom " and that tax
revenues will quickly rebound to
pre-pandemic levels overnight. Short
of assistance for state and local governments from Washington, D.C.,
state and local budgets will remain
uncertain over the coming years.
Government leaders historically
have cut park and recreation budgets to balance their budgets. This
pattern repeated itself early in this
crisis, with two-thirds of local park
and recreation leaders reporting in
late June (nrpa.org/ParksSnapshot
June24) that they had slashed their
current year operating budgets, with
the typical cut between 10 percent
and 19 percent. With state and local tax revenues unlikely to recover
quickly, park and recreation agencies
likely will be on the defensive as they
work to protect their budgets.
The public health emergency
demonstrated once again how
parks and recreation are an essential government service. The
2020 NRPA Engagement with Parks
Report
(nrpa.org/Engagement)
finds that 82 percent of U.S. adults
agree with this sentiment. With so
much uncertainty, it has never been
more critical for our professionals
to make the case for the essential
nature of parks and recreation.
Kevin Roth is Vice President of Research,
Evaluation and Technology at NRPA
(kroth@nrpa.org).

November 2020 - Parks & Recreation

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