As we begin to grapple with the economic fallout from COVID-19, don’t forget the severe strain this could place on state and local governments, in ways both direct and indirect. Another TPM reader report:
What I’m worried about longer term is municipal finance. I work at a toll agency, for example, and some toll traffic is down roughly by half. Revenues to local and state governments – especially usage based (sales, use, fuels taxes and tolls, etc.) will be hit hard, in some cases at the same time they’re being asked to assist workers and small businesses. But many of these revenues are pledged to bond debt service, and there could be widespread threats of default.
Unlike the federal government, states and locals must balance their budgets, so it seems to me the feds need to step up quickly to backstop state and local revenue shortages to avoid some very bad outcomes (and demand the financial industry step up as well). I don’t want to be alarmist, but I’m concerned there’s so much to pay attention to in the near term that we might miss proactive measures to forestall problems coming our way.
