鈥楴o payroll protection鈥�: Cities try to plug budget holes amid pandemic
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Nick Roll Staff writer
| Cincinnati
Quinton Lucas is frustrated, yet calm and composed, as he rattles off the issues facing Kansas City, Missouri, where he鈥檚 mayor.
The economic effects of the pandemic have withered the tax base. Budget cuts made in response have left less money for public health, contact tracing, and small-business relief. The city has also resorted to furloughs, reductions in services, and the elimination of vacant jobs. 鈥淧eople always think that鈥檚 easy,鈥� he says of the last one. 鈥淏ut when you鈥檙e talking about firefighters or paramedics, which we are, it creates a real challenge.鈥� Now the city is facing a revenue shortfall of $58 million, and in total a $70 million budget hole will need to be plugged this month.
2020 was a rough year for state and local governments. In Mr. Lucas鈥� state, the Department of Social Services . In Rochester, New York, 鈥� already financially troubled 鈥� laid off teachers and closed five schools. Medicaid copays , and both the city of , and the ordered hiring freezes.
Why We Wrote This
City and state officials have faced tough decisions to meet balanced-budget requirements, reducing services and adding to unemployment lines. Will states and municipalities receive more federal aid this year?
The economic fallout from the pandemic 鈥� high unemployment and cautious consumer spending 鈥� has battered budgets that rely on sales taxes, income taxes, and other revenue related to travel, tourism, and consumer expenditures. With Democrats taking control of Congress, federal relief might be on the way. But for now, states and cities are navigating the consequences of major cuts made last spring 鈥� when revenue projections were worse 鈥� while factoring in current economic forecasts, which are improved but still uncertain. All this time, the legal requirement to keep budgets balanced has been hanging overhead.
鈥淚n the shortest terms possible, revenues are going down and expenses are going up. And whenever you鈥檙e putting together a budget, that鈥檚 a really difficult thing to deal with,鈥� says Dan White, who studies fiscal policy at Moody鈥檚 Analytics.
In human terms, economists say, the result has been about 1.3 million local and state government jobs lost since last February 鈥� adding to unemployment lines, to say nothing of delayed or cut government services. Jobs data released by the Bureau of Labor Statistics on Jan. 8 indicates that about 50,000 state and local government jobs (including in education) were lost in December alone. On average, cities across the country have seen revenues since the pandemic started, according to a December report from the National League of Cities (NLC).
鈥淚n the first CARES Act that came out, the $2 trillion package, there was some support for state and local [governments]. It wasn鈥檛 enough,鈥� says Joseph Kane, a senior research associate at the Brookings Institution. Ditto for the stimulus package passed shortly before the new year.
鈥淲e鈥檙e still early days in the true, long-term effects of this,鈥� Mr. Kane says.
Narrowly targeted aid
While Congress approved some aid in both of these relief bills, much of it was narrowly targeted, or restricted to cities of certain sizes. Additionally, Congress left much of the divvying up of funds to be negotiated between state and city governments 鈥� 鈥渁nd in most cases, the localities don鈥檛 have much leverage,鈥� says the NLC鈥檚 Michael Gleeson. While the funding that has come through has helped with personal protective equipment and other costs that have increased due to the pandemic, it hasn鈥檛 helped prop up jobs or general budgets, mayors and economists say.
鈥淲e were fortunate enough ... to participate in the Payroll Protection [Program],鈥� Mayor Ronny Walker of Ruston, Louisiana, says of the private businesses his wife runs. But over at mayors鈥� offices, 鈥渃ities got no payroll protection plan at all.鈥澛�
Some state budgets haven鈥檛 fared much better. In Florida, legislators will have to plug a this spring. Last May in Ohio, the state government from public spending. Although Gov. Mike DeWine recently restored some of the funding, given that worst-case budget projections haven鈥檛 come to pass, remain in place.
On the one hand, when revenues 鈥� in this case, mostly taxes 鈥� decline, expenditures have to follow suit. But the federal government can change the equation by injecting funds. It 鈥渟its in a unique position [in] that it can stimulate activity,鈥� says Mr. Kane of Brookings. 鈥淭his is not the time to be like, 鈥榃e need to cut back.鈥欌��
Mr. White of Moody鈥檚 Analytics agrees that while the federal government鈥檚 aid to state and local governments has had its bright spots, and some places have fared better than others, the current level of stimulus hasn鈥檛 been enough. Still, as some state budgets start to balloon with pension and Medicaid costs, it could force improvements: Tighter budgets are 鈥済oing to make government think of better and more efficient ways to do things,鈥� and could lead, in the long term, to a more efficient delivery of services. But with state and local government jobs at their lowest level since 2001, Mr. White says, the economy is missing out on 鈥渞elatively well-paying, mid-wage to high-wage jobs鈥� 鈥� and will be for a while.
It鈥檚 also important to watch how public sector layoffs play out along racial and ethnic lines, says Mr. Kane, noting that 鈥渁 lot of Black and Hispanic workers in particular have been hit very hard. And some of those same workers depend on transit systems to get to work, so they鈥檙e hit that way, too.鈥�
Balanced budgets 鈥� but at a cost
At the beginning of the pandemic, Mayor Nan Whaley of Dayton, Ohio, 鈥渄idn鈥檛 know what the bottom was going to be鈥� in terms of revenue lost. Things have since improved, and the city was able to balance its 2020 budget and pass one for 2021, but it came at a cost: The city furloughed 25% of its workers last spring, and as it started bringing people back to work, it put out calls for voluntary layoffs. Just over 100 workers took one. The employees union took a pay cut, as did management. Without federal funding, the city won鈥檛 be able to hire a new class of firefighters or police officers.
鈥淲hen you do a voluntary separation, voluntary buyout, you have huge holes in the organization,鈥� Ms. Whaley says, citing the fact that the city鈥檚 housing inspection unit lost a number of employees. 鈥淲ell, then that puts us in a big hole in housing inspection. And we haven鈥檛 adjusted to that yet because we don鈥檛 know what 鈥�21 is going to be like, and we don鈥檛 know if we鈥檒l be able to afford it. So you can lose large swaths of an organization that way.鈥�
Public sector layoffs can also hamper recovery in the private sector. With fewer people around to approve permits and sign off on private sector development, 鈥渢hose projects will be stalled out,鈥� says the NLC鈥檚 Michael Wallace.
鈥淚t鈥檚 not lost on me鈥�
Some eight months into the pandemic, reported COVID-19 cases hit in the United States. As long as life is disrupted by the pandemic, local government budgets will be disrupted as well.
鈥淲e live off of conventions, we live off of football games, we live off of those big kinds of activities. People come to the city for Christmas celebrations, and shopping, and parades after Super Bowl wins,鈥� says Mayor Lucas of Kansas City. 鈥淭hose are the sorts of things that actually have generated significant revenues for Kansas City over the years.鈥�
And with budgets in disarray, cuts are unavoidable, including to non-police public safety and youth outreach programs. Such programs received renewed attention and interest in 2020, a historic year for calls for police reform across the country. 鈥淚t鈥檚 not lost on me,鈥� says Mr. Lucas.
In some ways, things were easier at the beginning of the pandemic.
鈥淵ou know, a year ago or certainly in March and April when this was first coming on, we still had strong budgets. We still had money at the local level to address these issues,鈥� Mr. Lucas says. 鈥淣ow we鈥檙e addressing issues with a $70 million budget hole. So I have concerns. But we鈥檝e been through a lot in this city, this state, and this country, so I imagine we鈥檒l get through it.鈥�
