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Local Government Budgeting During Health, Economic and Inequality Crises

The views expressed are those of the author and do not necessarily reflect the views of ASPA as an organization.

By Darrin Wilson
June 14, 2020

In his 1940 American Political Science Review article entitled, “The Lack of a Budgetary Theory,” V.O. Key posed the question, “On what basis shall it be decided to allocate X dollars to activity A instead of activity B?” Most of us are familiar with this quote, and I believe it provides greater meaning today, during these troubling times in our nation. Now is the time for local governments to double down on public services and programs that can help close racial and economic inequities and place their communities in a competitive position when the health and economic crises eventually subside.

In just this year, local governments have been faced with three major crises: the COVID-19 pandemic, an economic slowdown due to COVID-19 and the crisis of deepening racial and economic inequities in our society. All three relate to local government budgeting in their own way.

As the pandemic spread across the United States, local governments had to immediately implement emergency measures within their own communities to contain the virus. This not only created additional pressure for health, police and fire services, but also forced governments to temporarily shut down almost all public services and programs, such as schools, libraries, recreation centers, license renewal offices, etc.

The economic impact of COVID-19 was almost immediate, as state and local governments issued stay-at-home orders across the country. Retailers, restaurants, bars and other businesses on main streets around the nation temporarily closed. Tens of millions of workers filed for unemployment insurance, and many were unable to pay rent and struggled to put food on the table. Overall, people did not spend as much on goods and services in their communities as they once did. The economic impact of the health crisis is finally hitting local government budgets.

A recent report out by the National League of Cities predicts that cities alone will experience a 21.6% drop in revenue, which equates to almost $134 billion, this year alone. Over the next three years, they expect a combined loss of over $360 billion in revenue for all cities. Local governments across the nation have already started to cut their expenditures and use rainy-day funds to cover the budget shortfall for the remainder of the fiscal year and almost all of them are making plans for reduced revenue in the upcoming fiscal year.

This leads me to the third crisis. It is well-documented that racial and economic inequalities in our communities have increased over the past few decades. Unfortunately, these inequalities have been intensified and exacerbated during the recent health and economic crises. According to The COVID Tracking Project at The Atlantic, COVID-19 infections and deaths are disproportionally occurring for racial minorities. Economically, the Pew Research Center found in an April survey that 61% of Hispanic adults and 44% of black adults had households that experienced job or wage loses due to the economic slowdown, compared to 38% of Caucasian adults. Additionally, 73% of black adults and 70% of Hispanic adults said they don’t have enough reserve funds to cover three months of expenses, compared to less than half of Caucasian adults.

During “normal times” local governments might meet the calls to address growing racial and economic inequalities with increased investment in communities of color, through new programs or public services. However, the health crisis and subsequent economic crisis are limiting what local governments can do from a financial standpoint to address these intensifying inequalities. If history is any predictor of the future, we can expect that local governments will cut important public programs and services, many of which are vital to the success of communities of color, such as libraries, public parks, recreation centers, housing assistance, health clinics, senior services and more. Additionally, while some programs and services may still be provided, it can be expected that front-line staff will be laid-off. In turn, growing inequalities will increase the need for these programs and services at this important time.

When I teach my public budgeting class, on the first day I tell my students, “Show me a government budget, and I’ll show you that government’s values.” During this health, economic and social crisis, now is not the time for local governments to shrink away from their core values, including equality and humanitarianism.

Will this mean raising taxes, eliminating some economic development incentives such as tax abatements? Postponing capital expenditures such as new police cars or public works vehicles? Leveraging CDBG funding to other programs? And/or entering into service agreements with bordering governments? Maybe. As we all know, local governments are vital to the everyday lives of their residents, and how government leaders decide to allocate X dollars to activity A instead of activity B is tough. But these decisions should not happen in a vacuum; they should be embedded in the core values of our communities and society.

Author: Darrin Wilson is an Assistant Professor of Public Administration at Northern Kentucky University. His areas of focus are local government budgeting and community/economic development. He can be reached at [email protected]

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