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09-01-20 | Economic News

NLC Research Finds Local Governments are Hit Hard by Pandemic

35th Annual City Fiscal Conditions Report
by Staff

The National League of Cities released their City Fiscal Conditions 2020 report. The research illuminated the pandemic's economic impact from the unprecedented year that local governments have had to endure. NLC CEO and executive director Clarence E Anthony made a statement on the release of the information in which he announced, "This report helps city leaders prepare for the storm that may still be coming to our nation. The reality is that our cities are struggling. We want to prepare local leaders to lead America during tough times. We know that a national recovery is not possible without cities, towns, and villages being economically strong."

Anthony's point that cities are struggling was reflected in the report, which had three significant findings. It was found that the economic downturn experienced since March has been similar in magnitude as that of the great recession that took about six years to hit its peak and, more importantly, took over a decade to recover from the start of its decline.

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The revenue from taxes that local governments receive was also noted as a concern. The report described the situation by explaining that "all three major tax sources were continuing to grow at a robust rate - then the pandemic hit." Those sources being income, sales, and property tax, with the first two estimated to decrease by about 4% and 10%, respectively, with the third predicted to begin a decline.

The report's final major finding was the differences in impact for cities based on their fiscal years' timeline. NLC's research revealed that cities with fiscal years beginning around the time COVID reached the United States were hit particularly hard as their budgets are "facing the full brunt of the economic downturn throughout 2020." Conversely, "those that started their fiscal years in 2019, reaped the benefits of a stronger economy and only felt the downturn in the tail end of their fiscal year."

Dr. Mark Zandi, chief economist for Moody's Analytics, commented on the report and provided insight into the necessary actions for the federal government to take for their local affiliates to improve upon these trends. Zandi stated, "Bottom line, the top of the list of things lawmakers need to do today to get us on the other side of the pandemic is providing support to state and local government. The dollar that goes to the state or local municipality goes straight to the local economy. The support from the federal government is an immediate injection into the economy. The money going to local government goes to essential services."

To read the full report, go to:
https://www.nlc.org/sites/default/files/users/user57221/City_Fiscal_Conditions_2020_FINAL.pdf


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