States, cities are desperate for stimulus aid

For many, it’s not a blue/red issue

Facing deep budget shortfalls, state and local governments have shed 1.3 million jobs since the pandemic began last year — translating into a loss of more than 1 in 20 government jobs, according to a Washington Post analysis of government data.

While tax revenue grew in some states last year, the majority — at least 26 states — were hit with shortfalls. Revenue declined by 10 percent or more in five states, including a 43 percent drop in Alaska and a 10 percent decline in Florida. The toll was felt in both Republican-led states like Texas, which saw a 10 percent shortfall, and Democratic-led ones like Oregon, which weathered a 13 percent drop.

Rescuing struggling state and local governments has been at the center of Congress’ debate over how to address the economic upheaval caused by the pandemic for months. Republicans oppose the idea, calling it a “blue state bailout” that would reward poor local financial management. Democrats say that without this help, states and local governments could turn into a drag on an already slow economic recovery, and have set aside $350 billion in aid to state and local governments in the $1.9 trillion coronavirus relief package making its way through Congress.

Some cities, like Arlington, say they are at the precipice. The pandemic has devastated tourism tied to major sports events and venues, like Dallas Cowboys football games or the hosting of the 2020 World Series. The city cut department budgets across the board by 2 percent to 8 percent, stopped all new hiring, left vacant positions unfilled and leaned on $21 million in Cares Act funding until it ran out in December.

The city hasn’t had to lay off any local government employees — yet. But Arlington could still face a $20 million to $30 million drop in property tax revenue later this year, said Mayor Jeff Williams.

“We’re hopeful we’ll get the assistance, because it’s the right thing to do,” Williams said. “This isn’t a red or blue issue. This is an American issue.”

The strain has already forced some local officials to cut services, weigh tax increases or find other cost-saving measures to balance their budgets.

As a global pandemic seized the U.S. economy, the city of Dayton, Ohio, offered its 1,800 city employees voluntary separation plans. More than 100 took the offer.

To get through this budget cycle, Dayton’s police and fire departments aren’t recruiting new classes in 2021. Funding for capital projects — from roads to new dump trucks — has been slashed. Making matters worse, said Dayton Mayor Nan Whaley, the region was still healing from the 2008-09 financial crisis when the pandemic hit.

“We froze everything last year,” said Whaley, who is also vice president of the United States Conference of Mayors. “When March and April happened we said, ‘if it doesn’t have to do with the pandemic, we’re not spending.’ ”

State and local governments are large employers, accounting for about 13 percent of non-farm jobs in February 2020. The public sector jobs also historically take longer to rebound from a recession than private sector ones, even when there isn’t a public health crisis, economists warn.

During the Great Recession, local governments tightened their belts in ways that took much longer to undo, even years after the private sector had fully bounced back. By March 2014, the private sector had regained and surpassed the number of jobs it had in March 2008, according to the Census Bureau. It took four more years for state and local governments to return to 2008 employment levels, slowing down the pace of the overall recovery.

States that rely on industries most affected by the pandemic are taking some of the hardest hits.

In Alaska, which relies heavily on the oil and gas industries, tax revenue plunged more than 40 percent between March and December 2020. Tax revenue in North Dakota fell 11 percent.

As spending on tourism and travel dried up, Hawaii’s tax revenue fell 17 percent.

Tourism is Hawaii’s largest industry and employer with visitors spending about $18 billion in 2019. In 2020, that figure fell to an estimated $5 billion, according to Gov. David Ige’s office.

The travel and tourism sectors are not expected to rebound until the pandemic ends and people feel comfortable booking longawaited vacations. Hawaiian officials say they don’t expect state revenue to bounce back to prepandemic levels until 2024.

“Even with the most generous of federal assistance, it is a staggering deficit,” Ige said in a statement.

Yet federal help may not be necessary for state and local budgets, said Chris Edwards, director of tax policy studies at the Cato Institute.

Edwards said he was encouraged by signs the economic recovery could begin to accelerate by the end of 2021, including rising home prices. Instead of a federal bailout, cities should rely on their state leaders for help, he said, adding that states should always be prepared with their own rainy day funds.

“If the federal government over does it with bailouts, I think it’s a disincentive for states to take care of themselves,” Edwards said.