NEW ORLEANS — Tax revenues are facing a perfect storm over the last two weeks, with both the coronavirus outbreak and a precipitous drop in oil prices threatening the health of government coffers, state and local leaders say.

That raises real concerns about whether government workers will need to be furloughed or laid off.

The City of New Orleans expects the $20 million to $25 million in sales taxes it collects from businesses each month to “drastically decrease” because of coronavirus shutdowns, city Chief Financial Officer Norman White said.

But those revenues could fall off even more as Mayor LaToya Cantrell tries to help local businesses with a sales tax amnesty program. At a news conference this week, Cantrell urged businesses to pay their sales tax collections from Mardi Gras immediately before taking advantage of a 60-day extension to make payments on sales going forward.

Cantrell said she and her team are considering furloughs and even layoffs to deal with the losses, which she warned the city would still feel a year from now. Several city library employees who sought emergency leave because they were afraid of exposure to COVID-19 at work were denied this week.

But in Jefferson Parish, Parish President Cynthia Lee Sheng struck the opposite tone, posting a letter on Twitter promising parish employees that they would keep receiving a paycheck and would not face layoffs.

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State government leaders are hoping they, too, can avoid layoffs and furloughs through careful budgeting. Not an easy task, said Sen. Cameron Henry, R-Metairie, a key member of the Joint Legislative Budget Committee.

“With restaurants, bars and businesses slowly coming to a halt … it’s going to be rough as it relates to sales tax for a while now,” Henry said.

He’s hoping a big uptick in grocery and household item purchases will help offset those losses in the short-term. But plummeting oil prices isn’t helping.

A fight between Russia and OPEC killed a deal that would have cut world oil production March 5. That left a surplus in world energy supply, leading to a massive drop in Louisiana light crude oil prices over the last month, from $56.87 on Feb. 16 to just $20.63 Thursday.

“When the price of oil is $20 and your break-even is $35, that’s a tough scenario,” said Gifford Briggs of the Louisiana Oil and Gas Association.

Briggs said for every dollar the average cost of crude oil drops, the state loses $11 million in tax revenue. Then, there’s the prospect of major layoffs in oil and gas support businesses along the Louisiana coast.

“For Louisiana it’s going to be the same challenges that every state faces with its businesses, but we’re also going to have this huge challenge of our biggest industry and one of the biggest contributors to our state budget being just decimated,” Briggs said.

Henry said that for the current fiscal year ending June 30, legislators were counting on severance taxes and fees from an average oil price of more than $57 a barrel. The recent oil price drop would only affect the last third of the fiscal year, meaning the average price of oil over the full 2019-20 fiscal year might not be so far off.

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But the budget the legislature is working on for the 2020-21 fiscal year assumed the average price of oil would be $60 a barrel. Briggs worries the average for 2020-21 could end up settling around $27 a barrel if supply remains high and demand keeps decreasing.

“Then you are significantly off. You’re talking about $300 (million) to $500 million we would have to reduce from next year, the budget we’re working on now,” Henry said.

Henry, a leading fiscal conservative, said it’s time to prepare for major spending cuts, but he hopes to avoid furloughs and layoffs for state employees.

“Everyone has to manage their expectations on what the state will be able to provide,” he said. “Obviously, adding to the unemployment problem by having furloughs is not anything anybody wants to do.”

A Revenue Estimating Conference was supposed to be held on the third Monday of March to revise assumptions of revenues for the 2020-21 budget, but it has been pushed back to April.

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