Tough decisions on the horizon as Houston looks at hundreds of millions in loss in wake of coronavirus

HOUSTON – The coronavirus pandemic has sent shockwaves through the global economy and no one is sure of just how bad it might get.

KPRC 2 took a look at how Houston is preparing for the economic fallout of the crisis that has brought local businesses to a grinding halt and has left thousands jobless.

There are 7.5 billion people in the world. The U.S. population is about 327 million people with 29 million in Texas and about 2.4 million in the city of Houston.

Not one of them knows when the crisis will end.

“No one knows, for example, whether this situation will last in May, June, July. The situation is just so fluid,” said Houston Mayor Sylvester Turner during a news conference this week.

The uncertainty of when this will end is seriously messing with the city of Houston’s $5 billion budget. The budget is principally powered by local tax revenue, but right now, everything is closed.

The city already lost the Houston Livestock Show and Rodeo, the massive Offshore Technology Conference (OTC) and the NCAA Sweet 16.

“Looks like we could have a $300 million shortfall, but it could be much more than that because we don’t know how long this is going to last,” said City Councilmember Michael Kubosh.

‘Worst Case Scenario’: $331 million deficit

Recently, the city’s Controller’s Office put out a “stress test” report, one week before city and Harris County officials announced the order for residents to stay home and work safe.

The report is a model, not a projection.

It was put out so the city could see what could potentially happen in three different situations.

The report indicates that the best guess is that the city will see the “worst case scenario.”

The worst-case scenario is most indicative of the great recession.

According to the report, "Our hypothetical recession, over a five-year period beginning in FY 2021, based on historical trends revealed a worst-case scenario of an operating deficit of $331 million."

What can be cut?

Tough choices are on the horizon and barring a reprieve at the state level, the budget has to be nailed down by the end of June.

So what can't be tinkered with?

We asked for opinions of Houston residents we found around downtown.

A common theme: first responders, utilities and trash services

Kubosh thinks that's a good list. But will city employees see layoffs?

“Well there’s a possibility of city layoffs but those essential services for our citizens... those key services we’re going to keep going,” said Kubosh. He added, “things like the libraries and the parks, we may see a reduction in our services there.”

The bigger picture

Recently, Robert W. Gilmer, Director of the University of Houston’s Bauer Institute for Regional Forecasting authored a report focusing on the bigger picture.

Houston’s Economic Outlook Reshaped by COVID-19 and the Oil Price War

“During this 12 month period that is ahead of us, we are going to see some really extraordinary statistics,” said Gilmer.

An estimated 200,000 Houstonians are out of work right now. Food service is a huge chunk. 156,000 jobs will come back probably this year, but there's residual pain.

The bottom line is the same as our topline. The longer we’re living like this, the tougher it’ll be to move forward, for individuals and for the city.

Kubosh is still hopeful, "I do believe we're gonna be just fine."

“... And we’ll simply have to make the tough decisions like everybody else is making tough decisions,” said Turner.