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Column: State and local budgets face a pandemic-related meltdown. Why won't Republicans help?

By Michael Hiltzik, Los Angeles Times on

Published in Business News

While every thinking person is rightly worried about the prospect of a third U.S. wave of COVID-19 cases and deaths, one should take a moment to contemplate a pandemic-related disaster in which the first wave is just beginning.

That's the meltdown of state and local government budgets produced by the higher costs of dealing with the crisis combined with the collapse of revenues.

Over the next year or so, states and local governments could face budget shortfalls of as much as $650 billion, or one-fifth of their pre-crisis budgets, said Mark Zandi, chief economist at Moody's Analytics.

The fallout is already being felt in state and municipal layoffs and cutbacks in public services. Since January, state and local governments have reduced payrolls by 1.1 million workers, or more than 5.5%.

Employment may be creeping up in the private sector, but it's not returning nearly as fast in the public sector.

More cuts are in the offing. In the city of Los Angeles, for example, where a hiring freeze has been in effect for months with no end in sight, all departments have been instructed to draw up layoff plans.

 

Civilian employees will shoulder 18 unpaid furlough days in the current fiscal year to produce a savings estimated at $104 million from the overall general fund budget of $6.7 billion.

"The projections are that state and local governments will be laying off 2 million to 3 million more workers," says Bharat Ramamurti, one of the four members of the congressional committee overseeing relief disbursements from the CARES Act, which was enacted in March. "From a purely economic perspective, that's catastrophic."

The nationwide pain could be averted, or at least ameliorated, by an infusion of aid from the federal government. Unlike most states and local governments, the federal government isn't required to maintain a balanced budget, meaning that its capacity to spend borrowed funds is theoretically unlimited.

But no such assistance is on the horizon, thanks largely to Republican resistance on Capitol Hill and in the White House.

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