Jun 4, 2020 - Politics & Policy

Cities' budget woes worsen with increased social unrest

Illustration of buildings.

Illustration: Sarah Grillo/Axios

Cities were already furloughing workers and considering cutting back essential services — including public safety — because of the dramatic drops in the local tax revenue that funds them. Now they're also dealing with turmoil in their streets.

Why it matters: "Unfortunately, the increasing levels of social unrest across the country reallocated efforts and scarce resources away from the former focus of getting state, regional and local economies back to some semblance of normalcy," per Tom Kozlik, head of municipal strategy and credit at HilltopSecurities.

  • "Virus-related safety and health concerns are likely to begin to heighten, especially if the lack of social distancing in recent days causes COVID-19 cases to escalate," he wrote in an analyst note. "This could be another obstacle to the reopening process."

The big picture: The overall budget shortfall for cities, towns and villages is expected to top $360 billion between 2020 and 2022, according to a May National League of Cities analysis. The Upjohn Institute projects a roughly $900 billion shortfall for state and local governments through the end of 2021.

Where it stands: Washington leaders are still far away from passing the next coronavirus relief package, as congressional Republicans and Trump administration officials say they must wait to evaluate the economic impact of the CARES Act and reopening before passing another large stimulus package, per Axios' Alayna Treene.

  • Senate Majority Whip John Thune said this week that the next round of funding isn’t expected until July.
  • Mitch McConnell recently told President Trump and Treasury Secretary Steven Mnuchin that he wants the phase four bill to be narrow in scope and focus on short-term economic relief, not longer-term recovery.
  • A top priority for GOP lawmakers is for the bill to include incentives for people to get back to work, as well as liability protection for businesses that are reopening. 

City leaders are increasingly frustrated that Congress has not stepped in to provide more relief directly to cities, and states are slashing budgets.

  • "Trump is going around saying police can make cities safer. But you know what isn't going to make cities safer is laying off police officers and firefighters," said Cincinnati Mayor John Cranley. "Even if Cincinnati can weather the storm, if my neighbor has to lay off cops, it's going to impact my town."
  • Cincinnati, which is expecting a deficit of $80 million for the fiscal year, furloughed 1,700 employees and hopes to bring them all back July 1.
  • "Our budgets are gutted," said Kansas City, Missouri, Mayor Quinton Lucas. "No mayor knows how bad it's going to get. Everything is on the table when it comes to cuts, and that means public safety, too."

What's next: Congressional Republicans and the Trump administration have said the House-passed, $3 trillion Heroes Act is a nonstarter.

  • The likely pathway is, once GOP lawmakers feel they have properly evaluated the impact of the legislation they've already passed, they will draft their own bill. They will then negotiate that version with Democrats.

Go deeper: Inside the idea of state bankruptcy

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