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Responding to the Local Economic Impact of COVID-19

by Aaron Thompson, on April 17, 2020 at 8:53 AM

As the COVID-19 pandemic appears to inch closer to its peak in the United States, local governments are preparing to brace for the economic and fiscal fallout that awaits them on the other side of the crisis. Below, we highlight what local governments are feeling and how responses are beginning to form.

The National League of Cities (NLC) and U.S. Conference of Mayors (USCM) recently released a survey of 2,180 local officials from across the nation on how they are beginning to prepare for this impact. Here are a few takeaways from the survey: 

  • 88% of cities are anticipating a revenue shortfall.
  • Sales Taxes, Utility Fees, Permitting Fees, and Other Services Fees were indicated as some of the largest revenue declines that were affecting 60% plus of all local governments surveyed.
  • 52% of survey respondents indicated that they are preparing to cut public services and reduce employment through either employee layoff or furloughs.
  • 52% also indicated that cuts will impact police forces and public safety.

To see the full survey results in more detail, click here.

It is clear that public sector surpluses have changed into deficits overnight. As seen through the results in the survey referenced above, larger population centers are seeing a fiscal impact on their budgets more so currently than small governments. As layoffs and manufacturing shutdowns continue into another week, problems could worsen for local governments with decreased utility usage by major users given the decrease or lack of production.

The NLC and USCM have called on the federal government to directly assist revenue shortfalls through direct payments to local government. In a bipartisan request from Maryland Governor Larry Hogan and New York Governor Andrew Cuomo, the National Governors Association has also called on Congress to appropriate an additional $500 billion in funds to aid state government budgetary shortfalls.

The likelihood of this happening has not yet been made clear. The US Department of Treasury has begun providing additional guidance on how all state governments and larger local governments (with a population of over 500,000) can begin to access funds from the CARES Act’s Coronavirus Relief Fund. However, additional guidance has not been yet given on how states can assist local governments through the state appropriation.

This week, the President is expected to announce teams of private sector leaders to partner with the Center for Disease Control to create new guidelines that will allow Americans to return to their workplace in a safe, health-focused manner. Over the past few days, a number of governors have announced efforts to begin preparing for the economies returned. New York has led a group of neighboring states to launch a task force on the east coast while California, Oregon, and Washington have banned together the same way in the west. Other states such as Texas, Ohio, and Tennessee have announced their own efforts.

Much like federal and state governments, local governments leaders should continue to look and plan to the future. From an economic perspective, it is critical that there are businesses to reopen and a workforce in place in your community once the restrictions are lifted.

Here are some suggestions and one questions for your community’s recovery efforts:

  • Communicate with businesses in your community and ensure that you are there for them during this difficult time. Offer to be a connection point for any resources that might be needed.
  • The CARES Act’s Paycheck Protection Program, through the Small Business Administration, can assist your communities’ employers with a forgivable loan through the crisis. Be sure to share this information with all organizations that are eligible.
  • Enhanced unemployment benefits were also included as part of the Cares Act. For citizens that have been laid off, work to inform them of how they can apply for unemployment benefits through your state government.
  • Following the lead of the federal & state government and recommendations they make for re-starting the economy, what can local leaders in the public and private sector be doing in your community to returns thing to normal?

From a revenue perspective, now could be the most important time to act through one of the following ways:

  • Stay on Schedule. Ensure that revenue collection and processes are consistent and on-time. If your process is delayed a month now, how will that effect your community when tax payments come in postponed later in the year? Especially for communities running on a tight budget, this is critically important.
  • Plan for the Difficult Short Term. As state government budgets are finalized across the nation right now, many have taken the realistic approach of a revenue decline and uncertain projections into the future. My home state of Kentucky has modified its normal two-year budget into a one-year budget that will be re-evaluated this winter. Budget cuts will have to be made, most likely for the immediate future but as the economy returns over the coming months, things will progress towards normalcy.
  • Seek Aid for Unexpected Costs. As referenced in our previous articles, through the CARES Act, a number of funds have been allocated to assist local government's unexpected COVID-19 related response expenditures through programs such as FEMA’s Public Assistance Program, HUD’s CDBG Program, or the CARES Act Coronavirus Relief Fund.

Localgov will continue to update you on resources as they are made available.


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Topics:local governmentlocal leadershipazavarcovid-19localgovemergencycares actfederal governmentstate government

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