ANDERSON — As another 4.4 million Americans – including more than 75,000 workers in Indiana – filed initial claims for unemployment last week, local governments are bracing for what many analysts predict could be a catastrophic loss of tax revenue as the economy gradually emerges from an unprecedented shutdown forced by the coronavirus pandemic.
A report released this week by Ball State University’s Center for Business and Economic Research forecasts two scenarios – one more optimistic than the other – that each have local governments in the state collectively losing at least $200 million in tax revenues in 2020.
“We have been observing and participating in economic estimates of the impact of COVID-19 since January,” Michael Hicks, director of the Center for Business and Economic Research at Ball State, said in a news release. “The only consistent observation over this period is that every projection has worsened following later analysis.”
Hicks said the more optimistic projection forecasts losses of $218.4 million in local option income tax revenues across the state. A second, more realistic projection, he said, has those losses as high as $315.4 million.
Madison County could see tax revenue losses of $3.5 million and $5.1 million, respectively, in those scenarios.
“There will be some ripple effects for sure,” said Rob Sparks, executive director of the Madison County Corporation for Economic Development. “It will definitely impact how (local municipalities) do their budgets the remainder of the fiscal year.”
Hicks noted that the CBER’s report does not address two key variables: local property taxes and the impact of federal aid programs like the CARES Act, which provides assistance in the form of direct payments to taxpayers and low-interest loans to businesses. However, he added: “These estimates are a good faith effort to prepare local and state policymakers with a description of the potential revenue conditions likely to surround the state in the coming weeks.”
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