Layoffs add to economic woes

Combining the recent layoffs of more than 340 company and contract workers at Invista with the current nationwide recession, Waynesboro stands to lose an undetermined amount of tax money. However, the negative economic news at the local, state and national levels will have a deeper, residual effect on residents and the city.

Layoffs, according to Michael Cassidy, executive director of the Commonwealth Institute for Fiscal Analysis in Richmond, mean people will lose health insurance, have limited unemployment benefits and will put a strain on the city’s budget as people cut back on shopping and eating out. That doesn’t count Virginia Gov. Timothy Kaine’s latest proposal to slash $2.9 billion from the state budget.

“Two-thirds of the economy is consumption, so when people aren’t consuming as much, it has an effect on sales and taxes,” Cassidy said. “We fund things like our educational system, our local police and our local community needs, so it has a cascading effect as well.”

City Manager Mike Hamp said the city is doing what it can to understand what revenue it will have available.

“There are economic forces that will impact our revenue,” Hamp said. “Largely, or the best example of that, would be the sales tax revenue. As the economy is in decline, or recession, you would expect your sales tax revenue to reflect that.”

Waynesboro, in the last 12 months dating to Sept. 2008, has brought in $5 million in sales tax money, according to the Virginia Department of Taxation. In fiscal year 2007, the city took in about $2.2 million in meals tax money.

Hamp said the city has yet to fully review the impact of Kaine’s proposed cuts, which will have to be approved by the General Assembly. He said it will likely be late February, when the 46-day session ends, before he gets a better idea of the state budget’s impact locally.

Hamp expressed a concern for 599 funds, which go to the city’s police department, as well as state support for constitutional offices and education funding.

“If there are occasions where a particular service has been exclusively funded by the state, if the state reduces or eliminates the funding, it would be difficult for the locality during times like this to absorb that service,” Hamp said.

Waynesboro’s reduced money from the 599 fund is $832,250 for fiscal year 2009. Under Kaine’s proposal, that would be cut to $804,479.

Kaine also wants to cut $400 million from public education. Waynesboro Schools Superintendent Robin Crowder said upon the announcement that he and his staff would determine after Christmas where the school district would suffer cuts and what they would mean for the district.

Cassidy said the economic downturn is worse on localities than the state or federal government.

“As they lose revenue, they have to cut back services at the time when they’re needed, so it makes the situation worse. It’s one reason why we need federal assistance for this.”

He said opportunities at the state level, such as a proposed 30-cent hike in the cigarette tax, or with President-elect Barack Obama’ federal stimulus package, estimated at more than $850 billion over two years, could mitigate the poor economic circumstances on localities.

But in the short term, it’s a struggle for cities and their residents, Cassidy said.

Once workers are laid off, Cassidy said they have few options for health insurance, and said there is little to offer for the newly unemployed.

“We don’t have any really useful tools out there for folks who are newly unemployed to get them affordable care – health insurance for their families,” Cassidy said.

Also, he said Virginia has fewer people on unemployment insurance than all but seven states in the nation. Available part-time jobs don’t work well, he said, because people would then pass the threshold to qualify for unemployment benefits.

The Virginia Employment Commission allows people to receive up to 26 weeks of benefits and paid out more than $380 million in benefits to 260,561 people in 2007. Virginians received an average of $263.97 weekly in benefits and received them for an average of 12.5 weeks.

“We do not have a particularly robust unemployment insurance system in Virginia,” Cassidy said.

Hamp said the first goal for the city would be to balance its budget without impacting services to the community.

“It’s too soon to tell at this point whether that can actually be accomplished,” Hamp said. “It certainly would be our absolute goal to do that.”

The city adopted a $39.4 million budget for fiscal year 2009, which was cut by $528,000 in November. Other localities made similar, in-year cuts.

Hamp said idling nylon production at Invista would not have an immediate effect on the city’s machinery and tools tax revenue, but could in the future. The City Council learned in October it would receive $450,000 less than the more than $1.5 million it had anticipated.

While the council has the final say on where cuts will be made, Hamp said he would target non-essential material or supply items, employee training and development and look at areas where they can reduce the frequency or duration of city services to find cost savings. He has tasked department managers to look for operational efficiencies, fuel and energy savings and make adjustments to staffing and work schedules to maximize efficiencies. The city, he said, will focus on service priorities and service levels.

Some fixed costs, such as the debt service on the capital improvement projects – at more than $2.5 million in fiscal year 2009 — cannot be reduced, Hamp said.

In the meantime, Hamp said he would prepare a budget using Kaine’s proposals as a framework.

“We’ve not completed our review of the governor’s message at this point,” Hamp said, “but certainly, we would expect our community to be impacted in some way in that regard.”

The council has said it would not raise the real estate tax rate beyond its current 70 cents per $100 assessed value and has expressed its concern about the recent job losses and economic struggles reverberating in Waynesboro.

Hamp said the city would do its best given the resources and current economic times.

“My instructions to the department heads were … that the budget submittals should reflect the current year’s budget,” Hamp said. “And to the extent that they couldn’t do that, they needed to explain in clear terms why that wasn’t the case.”