The coronavirus epidemic has dealt an economic blow to the state and local governments, reducing tax revenues by hundreds of billions of dollars. Now, devastating budget cuts are threatening to cripple public services and increase the workforce by 1.3 million jobs lost in eight months.
Governors, mayors and county leaders asked for federal support before the end of the year. Congressional Republicans despised such help, Senate Majority Leader Ment McConnell called it the “blue state rescue team” in Kentucky.
But it turned out that this budget crisis is color blind. According to a report by Moody’s Analytics, six of the seven states that are expected to suffer the biggest revenue cuts in the next two years are red – states led by Republican governors and won by President Trump.
Leaders agree. “I don’t think red state is a blue state issue,” said Brian Sigritz, director of public budget studies at the National Association of Public Officials. Chief officials of the National Governors Association – Andrew M. Cuomo, Democrats of New York and Asa Hutchinson, Republicans of Arkansas – issued a statement this fall: “This is a national problem and requires a bipartisan and national solution. “
Efforts to create a new stimulus bill gained momentum this week with a $ 900 billion proposal – proposed by a bipartisan legislative group and backed by democratic leaders – that includes $ 160 billion for state, local and tribal governments. Without filling the growing budget deficits, this amount would be a welcome relief. But the Republican leadership is showing no signs of state and local aid.
In reality, the extent of financial hardship depends less on which party controls the state house or town hall than the number of Covid-19 cases, the types of businesses subject to the state economy, and the tax structure.
The states of Wyoming, Alaska and North Dakota, led by Republicans dependent on energy-related taxes, have been averted by a sharp drop in oil prices. In places where tourism generates large amounts of revenue, such as Florida and Nevada, revenue falls by 10% or more, as well as in Louisiana, which relies on both tourism and energy.
Elsewhere, the steep fall in sales and income taxes – which on average account for roughly two-thirds of state revenue, according to Pew Charitable Trusts – is forcing Republican and democratic officials to consider dismissing police officers, reducing childhood vaccinations and closing them down. libraries, parks and drug treatment centers.
Even the most optimistic assumptions about the course of the pandemic point to fiscal consequences for states and local governments that would be “the worst since the Great Depression” and will take years to dig down. ”Dan Dan, director of fiscal policy research at Moody’s Analytics, concluded. .
State-level austerity resonates in urban, suburban, and rural counties in almost every corner of the United States, and officials make prudent decisions.
In Casper, Wyo, someone from the district attorney’s office walks around the block to the District Court building every week and brings out a large plastic garbage bag filled with discarded paper clips for reuse.
The short trip is just one way for prosecutor Dan Itzen to cut costs. He also stopped for 17 types of misdemeanors, including abuse and battery, first drunk driving, shoplifting, fraud, and property damage checks.
“Something had to be given,” said Mr. Itzen, who handles about a third of Wyoming’s criminal cases and receives funding from the state. “If I lose staff, I can’t pursue more prosecutions.”
In Kansas City (Mo.), with a municipal budget of $ 1.7 billion, the city leader has asked individual departments to come up with a plan for more than 11 percent cuts. That could mean 200 police officers will be fired from the 1,300-strong force, as well as 180 firefighters and emergency medical technicians, Dan Fowler, a city council member, said.
“It’s one of the things that keeps you up at night,” Mr. Fowler said, thinking about the impact on the city’s half a million residents. Such cuts could result in the closure of one or two police stations, despite the fact that crime is on the rise, he said.
Emergency response times are already slow, Fowler said, so even though he lives near a hospital, “if I have a heart attack, I’ll just climb over there.”
From garbage collection to building permits to park maintenance to repairing potholes, “everything will slow down because we won’t need people,” he explained. A traffic study of a street in its district where there are serious accident charges is overdue.
In New Orleans, leaders of the democratic city are going through a similarly painful process, reducing the overall base for the next fiscal year by $ 92 million to $ 634 million.
To avoid layoffs, the city is cutting the salaries of senior staff by 10 percent and requiring most other employees, including police, firefighters and emergency responders, to spend 26 days a week every week – unpaid. This move will mean a 10 percent pay cut and will be complemented by six odd days imposed on some 4,000 employees in the city by the end of this year.
On a given day, this means there are fewer people available to drive buses, respond to emergency calls or take out the trash.
“We’re in the bone marrow,” said Gilbert Montaño, the city’s executive director. Each agency made an average reduction of 21 percent in addition to what they had already faced.
New Orleans, like most cities and localities, spends much of its budget on its employees, making it nearly impossible to cut spending without reducing the number of hours people work.
State and local employees make up roughly 13 percent of the country’s workforce. For women and black workers in particular, the public sector has historically offered more opportunities than the private sector than stable incomes and reliable benefits.
“These are people who provide basic public services every day, risking their lives,” said Lee Saunders, president of the American Association of State, County, and Municipal Employees. “And now there’s a good chance many will face a pink slip.”
So far, the vast majority of state and local jobs have been in education. Although many of the layoffs have been considered temporary, educators and parents fear they may become permanent. In a new survey of mayors, 45 percent said they expect dramatic cuts in school budgets.
Public schools rely predominantly on property taxes. States often provide additional funding, but many have cut their education budgets.
Most states have managed to gather themselves by the summer, which is the typical end of the fiscal year. There was strong growth before the March pandemic, and the $ 2.2 trillion CARES law, passed by Congress in the early spring, kept many households on their feet. In some places, extra federal money can be used to cover health and education expenses related to state and local epidemics.
Both pillows fade. In most places, the fiscal year 2020-21 will take place in the shadow of a pandemic and a stumbling economy. Federal emergency funds for extended unemployment benefits, which helped families cover housing and food expenses, expire at the end of December, placing even greater demands on public services.
Federal Reserve President Jerome H. Powell and many economists have warned that cuts in state and local spending will continue to drag on a weak recovery than after a major recession. Expenditures of the state and local governments accounted for about 15 percent of the country ‘s economic activity, according to the data of the Economic Analysis Office, which is part of the Ministry of Trade.
While the federal government may suffer from budget deficits to cover both regular and unexpected expenditures, states generally do not.
In Wyoming, Republican Governor Mark Gordon acknowledged the economic downturn after announcing a new round of cuts for the next fiscal year. He says 160 private sector jobs depend on every hundred government employees who spend money on hairdressing, children’s sports and restaurants.
While Wyoming faces one of the worst budget shocks, it also has one of the largest rainy sun sources built after the recent recession to help weather downturns. Several states — including Louisiana, Nevada, New York, and Illinois — have little or no reserves.
Nevertheless, the governor of Wyoming has stated that he does not want to burn through the state’s safety net, as difficult times may lie ahead for years. The fund may need to make up for an additional $ 300 million shortfall in public public schools. So Mr. Gordon has proposed programs that address childhood vaccinations, drug use, and mental health.
Meg Wiehe, executive deputy director of the Institute for Tax and Economic Policy, says Wyoming is at least dealing with the painful reality.
“With the bigger kinds of cuts that will resonate in people, they’ll all be in the head early next year,” Ms. Wiehe said. “We’re staring at some deep and very devastating cuts.”