Land Matters Podcast
The tragedy of the coronavirus pandemic is evident in so many ways, beginning with the death toll – more than 1 million deaths worldwide to date, and more than 210,000 of those in the United States alone. Economies are in turmoil, with staggering job losses and huge reductions in GDP. But for some time now, one part of this crisis has particularly worried economists and many others: how state and local governments are going to make it through.
Though the crisis itself is astoundingly complex, the economic equation is relatively simple. COVID has dramatically cut tax revenues — $200 billion and counting by some estimates — at the very moment when U.S. cities and states are dramatically ramping up expenditures to deal with the crisis. The result is budget shortfalls from coast to coast.
State and local governments employ essential workers in public health, police and fire protection, sanitation, and a wide range of other functions. Schools in most jurisdictions are funded by the local property tax, but some districts count on other forms of revenue, like the sales tax, or rely more on assistance from the state funding sources now threatened.
It all adds up to a troubling fiscal forecast, as another stimulus package from the federal government remains in doubt.
Decisions being made now will determine the course of any recovery, says Lincoln Institute Fellow Daphne Kenyon, who joins this latest episode of the Land Matters podcast. Cities and states need only look at how long it took to recover from the downturn associated with the Great Recession and financial crisis starting in 2008, she says.
The pandemic may well “cast a long fiscal shadow,” agrees Andrew Reschovsky, professor emeritus of Public Affairs and Applied Economics at the University of Wisconsin-Madison, who also joined the conversation. Reschovsky, a fellow at the Lincoln Institute for many years, cowrote an article in the National Tax Journal estimating the revenue and budget shortfalls across 150 cities in the Lincoln Institute’s Fiscally Standardized Database.
The bottom line: cities and states are looking at an extraordinary fiscal crunch that could last years.
Anthony Flint is senior fellow at the Lincoln Institute of Land Policy and a contributing editor of Land Lines.
Photograph Credit: Flickr/Oregon Department of Transportation.
The Fiscal Effects of the COVID-19 Pandemic on Cities: An Initial Assessment, National Tax Journal
How Coronavirus is Exposing States' Fiscal Risks, Volcker Alliance