Congress must deliver aid and empower localities to continue assisting in COVID-19 response
For cities, towns, and villages in Central New York and across the nation, the COVID-19 pandemic has created a devastating economic environment. Faced with declining tax revenues and staggering budgetary shortfalls, local governments are grappling with circumstances that threaten their ability to respond to the COVID-19 pandemic and maintain essential services for their constituencies.
Congress passed the bipartisan CARES Act, which provided an initial $150 billion in supplemental assistance to help state and local governments combat the spread of COVID-19. However, many smaller governments were ineligible for direct assistance under the bill’s population size criteria and as such, are reliant on state government to receive funding – which they have yet to see. While it is not the role of Congress to fill existing state budgetary gaps, as we work now to consider an additional COVID-19 aid package, I believe we must work across party lines to develop a bipartisan bill that ensures local governments have access to appropriate levels of assistance, empowering every community to continue work to combat COVID-19 and recover from this pandemic.
Many governments had to borrow and cut to enact annual budgets for the fiscal year that began July 1. Municipalities are incurring unexpected additional costs to keep communities safe and healthy, while revenue collection slows due to delayed tax deadlines and sales, hotel and lodging, and other taxes fall as consumers stay home.
These unprecedented revenue shortfalls are having a devastating cumulative effect on our economy. Federal Reserve officials recently warned that a ‘second wave’ of COVID-19 this summer would lead to “a decrease in real GDP, a jump in the unemployment rate, and renewed downward pressure on inflation next year.” A recent report by the National League of Cities projected that local governments are facing over $360 billion in lost revenues over the next three years due to the impact of COVID-19. For every 1 percent increase in unemployment, cities, towns, and villages are projected to experience an additional 3 percent loss in revenues. This year alone, U.S. cities are anticipating a revenue loss of at least $134 billion.
In balancing these additional costs and revenue shortfalls, many city leaders are forced to make major cuts to their budgets right as our communities need their services the most. Thirty-three percent of cities indicate they will have to furlough or lay off more employees, adding to the already staggering 1.5 million job losses in the public sector since March. In May alone, 571,000 state and local government employees were laid off. Forty-two percent of cities have already or will institute a hiring freeze to respond to these fiscal pressures – making it even harder for these workers to get their jobs back.
Moreover, as an additional drag on our national economic recovery efforts, 65 percent of cities are delaying or canceling capital expenditures and infrastructure projects. Sixty-one percent of cities are delaying or canceling equipment purchases, while 13 percent are making cuts to code inspection, planning, and permitting. These numbers are particularly striking, given that 63 percent of mayors planned to prioritize infrastructure development in 2020 before the beginning of the pandemic. Cuts to infrastructure spending at this magnitude delay reopening and the growth of local businesses, stifle job growth, slow local economic activity, and further imperil our fragile nationwide economic recovery.
With significant budgetary shortfalls stalling local COVID-19 relief efforts, Congress must work across party lines to deliver additional state and local funds. Failing to ensure all local governments have access to federal assistance will only prolong economic suffering and the health impacts of this pandemic. We need to act quickly and in a bipartisan manner to ensure cities, towns, and villages remain part of the solution in getting this public health crisis under control and putting our economy back on track.
Rep. John Katko represents New York’s 24th District.