Memo to state and local governments: Don’t count on more federal money  

President-elect Joe Biden most likely will be dealing with a Senate led by Republican Mitch McConnell. That bodes ill for a lot of the Democratic agenda, including major fiscal relief for states and localities, Governing reports. 

State and local officials continue to sound the alarm about pandemic-impacted budgets. Both Louisiana and East Baton Rouge Parish have drawn up budgets for the next year with expected federal aid included. Collectively, states and localities nationwide face shortfalls through 2022 in the neighborhood of $1 trillion—an estimated $434 billion among states; $360 billion for cities; and $202 billion for counties and parishes. 

Brookings Institution projects that state and local income tax revenues, for example, will decline by 5% this year, 7.5% next year and 8% in 2022. Revenue declines are going to be a multiyear issue.

“State revenues are inherently backward-looking,” says Tracy Gordon, a public finance expert at the Urban Institute. “People losing their jobs this year won’t show up (in terms of income tax revenues) until next year, unless they’re filing quarterly.” 

But if states, cities and parishes are facing a long-term problem, they now must also confront the short-term problem, and potential disappointment, arising from November’s election results.

At a post-election news conference, McConnell said there was a need for further federal aid, but he specified supporting schools, hospitals and small businesses, not general governments. He called Friday’s jobs report, which showed unemployment dropping to 6.9% in October, a “stunning indication of a dramatic comeback of the economy,” suggesting that only limited, targeted stimulus was needed. Read the full story.