U.S. states, cities and towns say they need a bigger bailout.
The federal government’s $2.2 trillion stimulus is doing little to help municipalities deal with their worst fiscal crisis in decades, leaving cities even far from the pandemic’s hardest hit areas facing stark choices to make ends meet. Dayton, Ohio, furloughed water employees to avoid first responder cuts. York County, Pennsylvania, sidelined workers to help avoid a debt default, and El Paso, Texas, may cut salaries to instead fund a local food bank.
“We need a bailout,” said Adrian Perkins, mayor of Shreveport, Louisiana, who slashed his own pay in the face of a $25 million revenue shortfall. He said the city doesn’t want to raise taxes on residents reeling from the economic impacts of the pandemic, so it will be forced to make cuts. “We’re planning ahead without the aid of the federal government, but we desperately need it.”
The nationwide shutdown has decimated virtually every source of tax collections, with businesses shuttered and more than 22 million people thrown out of work in the last four weeks alone. The Center on Budget and Policy Priorities projects a historic $500 billion shortfall for states through June 2022, while a survey of 2,400 local officials found nearly all of them expect deficits from the virus.
The federal stimulus provides $150 billion for municipalities’ virus expenses but doesn’t go to budget shortfalls and only helps states and cities greater than 500,000. The Federal Reserve announced loans to states and only cities with over 1 million residents.
‘Broke’ NY
That’s prompting calls for both Congress and the Federal Reserve to step up their aid efforts, with New York Governor Andrew Cuomo saying his state is “broke” with a $10 billion deficit. Governors, mayors and other local officials say it’s their turn for the federal government to save them from the financial upheaval caused by the pandemic.
The needs could be massive, with governors calling for Congress to provide $500 billion for state shortfalls alone. Local and state officials say the stakes are high. If they’re struggling, it could make the nation’s economic recovery harder. State and local governments contributed to 8.5% of GDP in 2019, more than the federal government, according to the Bureau of Economic Analysis.
“Everyone has the goal of getting the economy moving again -- we’ll be having to do things that will undercut that unless there’s more federal assistance,” said Rob Dubow, finance director for the city of Philadelphia, in an interview. The city is facing a still-uncertain revenue hit of hundreds of millions of dollars and is looking at the potential for “painful” cuts, he said.
Historic Hit
Leaders in the epicenter of the virus, Cuomo and New York City Mayor Bill de Blasio, warn the federal help so far doesn’t go far enough. The Independent Budget Office said in a report Wednesday that the most-populous U.S. city could see a $9.7 billion shortfall in tax revenues in fiscal 2020 and 2021 compared to what the office had forecast in January. The 475,000 jobs the city could lose in a year would rival what it saw in the 1970s when it was near bankrupt, the office said.
The federal aid is also limited to cities and counties with more than 500,000 residents, which accounts for 171 governments, according to the Treasury department.