American Cities Are Going Broke, Covid-19 Made Things Worse


The Covid-19 pandemic has ushered in a moment of economic destruction rarely seen in American history. One of the most evident indicators of the uncertainty created by this unprecedented moment was the massive correction which brought a record-breaking stock market to its knees at the onset of the crisis. But as time marches on, the long-term damage hastened by the pandemic will be measured in the harm done to the economy on the national, state, and local levels. As trillions of dollars have been printed and spent by Congress, propping up battered industries and providing emergency relief payments to individuals, little has been appropriated to supplement the billions in revenues lost at the local level. Now, cities are cashed strapped and struggling to pay their bills.

One of the biggest factors causing local economies to descend into economic chaos is the loss of tax revenues incurred once Covid-19 restrictions were implemented, originally to “slow the spread” of the virus. When restaurants are relegated to sidewalk services and businesses are closed, tax revenues that they would have generated are lost forever. The only problem is, cities must keep spending- or slash services to their residents.

Perhaps New Jersey Governor Phil Murphy said it best. In response to Republican Senator’s refusal to include state and local bailout money in their stimulus negotiations, more specifically, then Majority Leader Mitch McConnell, Murphy said the following: “We will just cut, cut, cut and cut. We won’t go bankrupt, senator, but we will leave our citizens in the lurch in their most profound hour of need,” according to reporting by Politico.

And it is some of the nation’s largest cities and states who are the first to have implemented Draconian measures to avoid bankruptcy. By April of last year, “Los Angeles ha(d) already dipped into its reserves, and is planning massive cuts to city services and salaries, with Mayor Eric Garcetti calling his upcoming budget ‘a document of pain.’” And they were not alone. “New York City is facing a $7 billion budget gap; the state is in the hole some $15 billion and Gov. Andrew Cuomo predicts 20 percent cuts in state aid across the board.”

But they are far from alone. The Fiscal Times reported in June that “Hundreds of cities, towns and villages in the U.S. plan to reduce spending significantly as they respond to budget shortfalls resulting from the coronavirus crisis, and many are already cutting back, according to a new report from the National League of Cities.” The survey conducted by the National League of Cities reported polled at least 1,100 municipalities and the findings were startling. Of those polled, at least 700 planned to delay or cancel critical infrastructure projects. Around 800 expected to slash spending on essential services such as Police, Fire, and Sanitation. A third expected to layoff or furlough its employees.

Moving forward, it is important to note that the economic pain felt in many places in America did not begin with, and will not end with, Covid-19. However, the economic legacy of Covid-19 may in fact be that it exposed the dire economic conditions of many of America’s cities and towns and made them exponentially worse. In 2019, Forbes reported that “Chicago-based municipal finance watchdog, Truth in Accounting (TIA) revealed…Sixty-three, out of America’s most populous seventy-five, cities do not have enough money to pay all of their bills.”

According to the report, the total unfunded debt of America’s largest 75 cities was approximately $330 billion, as of 2019. The pandemic economy will only compound these problems if spending is not dramatically altered or emergency funding is not issued. In total, the NLC report estimated that municipalities across the country would see shortfalls of up to $134 billion by the end of 2020 and upwards of $360 billion through 2022. City budgets in America were already treading water prior to the arrival of the Covid-19 pandemic, but the accelerated accumulation of debt because of it may be what ends up sinking them. 

Grassroots Pulse covers public policy and political issues aimed at engaging highly-active policy makers, donors, and grassroots leaders at the forefront of the political process in America today.

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