Fiscal aid to cities is essential, but must be more than one-size-fits-all
May 12, 2020
The next looming crisis resulting from COVID-19 — and the one that currently has become the focus of congressional debate — is the impact of both the public health and economic crises on state and local government finances. Absent federal action, state and local government will face near-impossible fiscal choices, ranging from mass layoffs to unsustainable tax increases when businesses and residents can least afford them.
The April unemployment data is evidence of the kinds of cutbacks that state and local government already are starting to make. Local government employment was down by just over 800,000 jobs and state government employment dipped by 176,000 positions.
Unfortunately, in a time of economic crisis, many states impacted by the fiscal crisis often will cut aid to local governments first. In public budgeting, it is a truism that when states catch a cold, local governments get pneumonia. Now we have the extraordinary economic impact of a deadly and tragic real-life public health crisis putting the finances of many local governments on life support.