COVID-19 is having a financial impact on local and state governments. New York state projects a loss of nearly $63 billion through the 2024 fiscal year. The state budget division says that’s a direct consequence of the pandemic.
But while the federal government is allowed to run a budget deficit, states and local jurisdictions can’t. Financial impacts on state and local governments depend on vulnerability factors like where the revenue comes from.
“In the fiscal sense, exposure would be that you rely upon revenue sources that are more likely to be impacted, let’s say income taxes rather than property taxes or state aid rather than locally raised revenue,” said Michael Wolkoff, economics professor at the University of Rochester.
Wolkoff said that the federal government should aid local governments who are struggling financially. The stimulus plan does not include aid to state and municipal governments.
“It seems to me this is an appropriate time when there should be federal borrowing to aid state and local governments,” said Wolkoff. “To me, one of the disappointments in this latest COVID-19 bill is that there is not a provision for that.”