Cities and states need federal aid to keep America afloat

David Adkins, Executive Director and CEO of Council of State Governments in Lexington, Ky., on Aug. 24, 2015. Photo by Pablo Alcala | Staff

Lexington Herald-Leader

While much of the media and the public remains fixated on the partisan drama in Washington over the coronavirus response, state and local governments are quietly doing what they do best: Keeping Americans safe, healthy, gainfully employed as much as possible, and educated, all during the worst public health pandemic of our lifetimes. And while federal leaders have provided targeted assistance to businesses and many Americans who have suffered economic losses due to the virus, these state and local governments have largely been left to fend for themselves. If we want our nation’s economy to recover, that cannot continue for long.

The Council of State Governments, headquartered in Lexington, Ky., is America’s bipartisan association of state governments representing our nation’s laboratories of democracy. With limited resources even in normal times, America’s state and local governments are the unsung heroes of the pandemic, providing lifesaving health care and emergency response services, while ensuring that Americans get the education and job training they need to succeed in a rapidly changing economy.

Nearly every category of state and local revenue is experiencing pandemic-related losses. States that have income taxes are seeing much lower income due to high unemployment. Sales tax income is also declining due to the sharp drop in consumer spending and store closures. Limited travel means less revenue from gasoline taxes for transportation projects.

States are facing at least $500 billion in unanticipated revenue loss. For counties, the number comes to $202 billion. And three-quarters of municipalities have already started making unavoidable cuts and adjustments in response to the projected $360 billion revenue loss over three years, while existing federal aid has not included most cities.

The combination of increased costs and lower revenue is creating large budget gaps. States and localities must continue to provide the programs and services that are needed now more than ever. As the economy struggles to recover, tax increases would only hamper the economic recovery.

Pandemic-driven job losses also have strained state Medicaid systems as Americans lose employer-provided health care. For the Medicaid programs to meet the needs of millions of Americans, Congress must increase the Federal Medical Assistance Percentages through at least September 2021. Health care is inextricably linked to economic recovery from the COVID-19 pandemic.

States provide a climate for business growth and expansion, which is undermined when the states’ own creditworthiness is in doubt. S&P Global recently opined: “We believe that in the wake of the COVID-19 induced recession, a propensity for revenue volatility, weaker rainy day reserves, and elevated fixed costs are leading factors that predict state budgetary distress.”

Without significant relief from the federal government, state and local governments will have to take drastic action to balance their budgets, such as slashing education and health care, laying off teachers and other workers, and letting our infrastructure fall into disrepair.

Every dollar spent supporting state and local government during a recession yields $1.39 in overall benefit to the economy. Using that multiplier, we can estimate that $500 billion in state stabilization funds would achieve a $700 billion positive economic impact.

The federal government, with its vast borrowing power, should solve the problem and help get the country back on track. Kentucky’s own senator, Senate Majority Leader Mitch McConnell will play a big role in determining the components of the next round of stimulus spending. If he wants to help the citizens of his state and others, he will use his influence to make certain state and local governments receive the aid that is needed to address urgent health care needs and speed economic recovery.

If state and local governments continue to struggle, so will America. The federal government should fully fund state, cities, counties and other local governments in order to protect Americans now and lay the groundwork for the country to thrive again.

David Adkins is the executive director/CEO of The Council of State Governments, a national, nonpartisan organization of all state and territorial governments headquartered in Lexington, KY.

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