This week, the State Policy Network, an organization that brings together free-market think tanks across the country, published a piece by the John Locke Foundation’s Joe Coletti. The piece focusses on what local governments can do to face the challenges coming out of the coronavirus outbreak. Coletti writes:
Local governments need to consider not only how to get through the near-term health crisis, but also how to prepare for the long-term financial challenges that ensue…
In the piece, Coletti explains that local governments are facing a major dilemma: revenues are going down, but expenditures are not. Coletti explains:
Closed restaurants and canceled events mean entertainment and tourism taxes take a big hit. New York City could lose up to $6 billion in tax revenue as a result of the coronavirus shutdown. College towns have lost much of their population six weeks before normal, and other towns will lose graduations, proms, and countless other celebrations…
As if that weren’t enough, demand for social services will increase, meaning higher costs for housing, food, mental health, and Medicaid in states where local governments share the cost. Cratering financial markets will demand higher payments over the next five years to maintain pension solvency. Health coverage for local employees will also likely become more expensive.
Coletti makes several recommendations on how local governments can respond:
First, local governments should reconsider economic incentives that throw money at large companies to move in instead of allowing local companies to grow. These usually involve both state and local economic development funds. States that have not yet imposed a moratorium on incentives for intrastate moves could easily do this. Local capital projects funded by the state still often require local expenditures to maintain. A pause would provide leeway for both the state and local government…
Now that local governments, like the rest of the country, are learning how to work remotely, they could consider shrinking the space they use and what facilities they can sell…
States should encourage local governments to look for ways to improve quality and reduce the cost of back-office teams (finance, IT, HR) by sharing services. Few local governments can afford to hire and keep a person with the experience needed for the complexity of protecting even a small town’s IT system or keeping up with Governmental Accounting Standards Board financial requirements.
Read all of Coletti’s recommendations here. Read more of his work here.
