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Coronavirus Impacting Budgets: Municipalities Warn Of Spending Cuts, Layoffs

Recession
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EDITOR NOTE: There’s a striking difference between an illness that rots you from the inside and one that begins on the outer surface. The former goes unnoticed until it's too late, whereas the latter prompts immediate action. Cities are beginning to shut down from the inside, as a direct result of the COVID-19 crisis. Many of its local citizens can’t see it in its entirety, often gleaning fragments from layoffs, infrastructure delays, cancelled municipal programs, etc. A temporary halt in municipal activity, or a permanent ruin? And what might happen to those who depend on a given city--one undergoing internal decay--for social programs, jobs, and pension income?

More than U.S. 700 cities plan to delay or cancel infrastructure projects after their responses to the coronavirus outbreak left budgets with unplugged holes, according to a National League of Cities survey released Tuesday. 

The survey, which collected data from over 1,100 municipalities in all 50 states, found that most cities will delay or cancel equipment purchases. Such moves could stunt local commercial activity among businesses and add to the layoffs and furloughs already underway in one-third of cities that responded. 

Cities have also been forced to cut seasonal programming, including summer youth jobs and summer camps, which primarily affect high-risk youth. Nearly a quarter of cities have cut spending for community and economic development programs. 

Most of the cities reported their largest unexpected cost over the last few months involved purchases of personal protective equipment and contracting disinfecting services to keep public buildings clean as they begin to reopen.

The National League of Cities called on the federal government to provide more funding directly to municipalities, warning that if it didn’t, the nation’s economic recovery from Covid-19 could be threatened. Nearly 70% of the cities responding to the survey said they had yet to receive funding from the federal government in previous relief packages. 

Cities have already requested $500 billion in direct federal aid and economic relief from the coronavirus pandemic, which has left millions unemployed and businesses across the U.S. shuttered for months. 

Last week, Federal Reserve Chairman Jerome Powell warned of the long-term risks for small businesses being imperiled by the slow economic recovery from a recession that began in February.

“The pandemic is presenting acute risks to small businesses,” Powell said in his semiannual testimony to Congress. “If a small- or medium-sized business becomes insolvent because the economy recovers too slowly, we lose more than just that business. These businesses are the heart of our economy and often embody the work of generations.”

Powell agreed that policymakers may have to use additional tools to pull the country out of a slump. The coronavirus has triggered a situation unlike previous recessions the U.S. has endured, and the response may have to be more from Congress than the Federal Reserve, he said. 

In New York, Mayor Bill de Blasio warned in April that the city’s response to the pandemic will cost a projected $7.4 billion in lost tax revenue over the current and next fiscal year. The city has since slowly started to reopen its businesses in phases, allowing in-store retail and outdoor dining on Monday. 

“That’s today’s estimate. We don’t know what the future brings, but that’s what we know right now and that’s a horrifying figure,” de Blasio said at a press conference. 

Originally posted on CNBC

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