The impact of the coronavirus is devastating, with budgetary consequences that state and local governments will face for years to come. Much as the Great Recession did, the pandemic will overwhelm many sub-national budgets; many cities are still recovering from the recession more than a decade later. The pandemic has severely reduced tax revenues while forcing increased spending to deal with the health crisis. Cities often do not have many options to address budget shortfalls and must make difficult choices–either raise revenue or cut spending.
Infrastructure is often on the “cut spending” list. According to the Congressional Budget Office, of the $441 billion spent on transportation and infrastructure, states and cities contribute roughly 80 percent. However, in the wake of the pandemic, the National League of Cities reported that more than 700 cities throughout the country have frozen or withdrawn plans to upgrade and repair infrastructure. Although the Cares Act allocated $150 billion toward “costs of responding to the coronavirus,” that was far short of the $500 billion estimated that would be needed, and there were limitations in the way the money could be used. Specifically, cities could not use the funds to address budget shortages which is the very circumstance with which many need assistance.
Additionally, the League of Cities found that nearly 70 percent of localities have not received any funds from the Cares Act. The uncertain financial security of many cities has been an ongoing source of concern for economists. Many warn that the ability of cities to provide jobs and adequate services for roads, water quality, public health and education will be compromised by recurrent budget shortages. Cities and states are left with limited ways of dealing with the gaps, leaving many looking to the federal government for assistance. A second stimulus package is expected to be drafted soon, and although anticipated to provide state and local aid, the final dollar amount may be far from what is necessary.
 Romm, Tony. “Over 700 Cash-Strapped Cities Halt Plans to Repair Roads, Water Systems or Make Other Key Investments.” The Washington Post, WP Company, 23 June 2020, www.washingtonpost.com/business/2020/06/23/cities-budget-infrastructure-cuts/
Photo Credit: Shutterstock