“It shows an economic ripple effect throughout the nation,” said Clarence Anthony, the organization’s executive director.
Cities had already predicted they would need about $500 billion from Washington to help cover the massive, unanticipated declines in tax revenue and other costs incurred from the pandemic, which has shuttered businesses and left millions of Americans out of work. But federal lawmakers have been unwilling to authorize such a cash infusion, forcing many cities to take drastic steps to balance their budgets for fiscal 2021, which for many governments begins on July 1.
In Chattanooga, Tenn., for example, Mayor Andy Berke (D) said he initially thought local leaders would boost their budget and make some “significant investments” in a range of public services next year. But the coronavirus quickly scuttled those plans, forcing city officials to scale back their more ambitious endeavors.
The new 2021 budget now scraps an effort to relocate a skate park from the south side of Chattanooga to its riverside district, a move that was meant to free up space for more commercial development. It also cuts $7 million from capital expenses in 2021, nixing the purchase of a new firetruck and other government vehicles. And the city’s financial blueprints no longer include a water-pipe replacement program, reflecting officials’ fears about paying for improvements using new local fees in the middle of a recession.
“In this moment, our constituents are asking us to do more, not less,” Berke said. “We are doing everything possible to serve people who have these needs, but the last thing we should be doing is reducing services.”
The array of cuts contemplated by cities nationwide illustrate economists’ repeated warnings about the financial crisis looming over state and local governments — and the far-ranging consequences it could carry in the absence of Washington intervention.
“It can really weigh on the economy if the states are in tight financial straits,” Jerome H. Powell, the chair of the Federal Reserve, said at a congressional hearing last week.
Even as some private-sector industries have started to rebound, state and local governments continue to struggle immensely. Public-sector employers shed more than 570,000 workers in May alone, according to data released by the Labor Department this month, bringing the total number of city and state employees out of a job since the pandemic began to more than 1.5 million. Many of these cuts have affected teachers, support staff and other workers in schools nationwide, leaving educators fearful that jobs and spending may never return to past levels.
In March, congressional lawmakers sought to offer some help to cash-strapped cities and states as part of the $2 trillion Cares Act. The law authorized $150 billion to cover the costs of responding to the coronavirus, including the purchase of personal protective equipment to keep government agencies and first responders operating safely.
Quickly, though, local officials discovered significant limitations to this aid. The Trump administration explicitly said the money could not be used to help local governments close their budget gaps, even though these massive, unanticipated deficits amounted to the greatest challenge they faced as a result of the pandemic. The Cares Act also directed the Treasury Department to dole out most of the money to the states, meaning some smaller cities and towns had to navigate their own, local bureaucratic challenges just to be reimbursed, threatening major delays.
Almost three months after President Trump signed the bill into law, some local governments are signaling that worst fears have come to fruition. The National League of Cities found 69 percent of municipalities have not received any money from the $150 billion federal program, either allotted to them from the Treasury Department or their home states.
For its survey, the NLC queried more than 1,100 cities across the country, more than 8 in 10 of which registered a population of less than 50,000 people. The data suggests that the smallest cities have faced the greatest trouble accessing limited federal support, the group said.
More than 800 cities, or about 75 percent of those surveyed, have sought to make up for their gaps by slashing spending in some fashion, either across the board or in more-targeted areas such as police, fire, parks and recreation services and public works, including sanitation. Roughly 260 cities, or nearly a quarter of those surveyed, even cut funds to local business development programs, the NLC found.
About 65 percent of cities either delayed or outright canceled their planned capital expenditures or infrastructure improvements. These cuts in particular could deprive local vendors, manufacturers and construction workers of critical business, experts said, meaning cities’ financial troubles could metastasize into a greater economic ill.
“These cuts drastically impact not only the people who live in these communities,” said Anthony, the leader of the NLC, “but it also impacts the jobs and essential infrastructure that’s needed in America right now.”
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