{"id":464922,"date":"2020-12-18T12:05:32","date_gmt":"2020-12-18T17:05:32","guid":{"rendered":"http:\/\/www.rochester.edu\/newscenter\/?p=464922"},"modified":"2021-06-28T16:00:49","modified_gmt":"2021-06-28T20:00:49","slug":"covid-forcing-local-governments-to-prioritize-financial-obligations-464922","status":"publish","type":"post","link":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/","title":{"rendered":"COVID-19 is forcing state and local governments to prioritize financial obligations"},"content":{"rendered":"

A federal stimulus plan could make a difference at relatively little cost.<\/h2>\n

The COVID-19 pandemic is taking its toll on state and local government revenues. The Brookings Institution projects that revenues will decline $155 billion in 2020, $167 billion in 2021, and $145 billion in 2022. The amounts are even greater if fees to hospitals and higher education are taken into account.<\/p>\n

\u201cStates generally get most of their revenue from income and sales taxes,\u201d says Michael Wolkoff, a professor of economics at the URochester. \u201cBoth of those revenue sources have been hit hard, and the way they\u2019re dealing with it is by cutting back on assistance to local governments.\u201d<\/p>\n

The degree to which local governments are being affected varies from one jurisdiction to another. A town dependent on tourism will be harder hit than one filled with retirees, who are drawing down their savings, rather than being dependent on employment.<\/p>\n

\u201cSome jurisdictions will be impacted more severely than others,\u201d says Wolkoff.\u00a0<\/strong><\/p>\n

Hopes among state and local governments are running high that Congress will pass a stimulus plan early in 2021. Can you comment on the benefit of the federal government stepping in to help state and local governments at a time when its own revenue sources are down? <\/strong><\/h3>\n

I\u2019ve seen estimates of state and local revenue shortfalls in the range of $200 billion, which doesn’t include the increased costs of dealing with COVID.\u00a0Federal borrowing costs are currently quite low, so severe dislocations could be averted at a relatively small cost.<\/p>\n

What are the implications for state and local governments given the resurgence of COVID-19 this fall?<\/strong><\/h3>\n

The implications vary, depending on the degree that jurisdictions ever emerged from the reduction in economic activity during the first wave of the virus. Those worst off will likely have to borrow money and then decide which obligations to pay right away and which to put off for the future. Bondholders have an immediate lien on the locality. If revenue sources dry up and the bondholders take a hit, it\u2019s possible the locality can go into bankruptcy.<\/p>\n

Should municipalities consider short-term or long-term borrowing?<\/strong><\/h3>\n

Both are appropriate, depending on the purpose of the borrowing. Let\u2019s say property taxes\u2014the primary source of a municipality\u2019s revenues\u2014are paid four times a year, but its expenses are spread out monthly. It is not uncommon to short-term borrow in anticipation of that revenue because there\u2019s a high degree of certainty the revenue will show up. On the other hand, if the municipality is trying to build a road, bridge, or school building\u2014creating something that will deliver services for the next 30 years\u2014it only makes sense to pay back the loan over 30 years so that the people paying back the loan are also the ones benefiting from the facility.<\/p>\n

What can municipalities do to protect themselves from future crises?<\/strong><\/h3>\n

Rainy day funds make sense, as long as the monies aren\u2019t tapped simply because it\u2019s politically easier than raising taxes.<\/p>\n

In the beginning of the pandemic, we were optimistic that things would come back because all the components that made the economy healthy would still be in place; people wouldn\u2019t forget how to do the jobs they were doing, machines wouldn\u2019t go rusty. So we\u2019d be able to get back on track pretty quickly. But the virus kept spreading and we haven\u2019t been able to return to work so quickly. This is an unusually severe event.<\/p>\n

Read more<\/strong><\/h3>\n
\n
\"illustrationDebt relief programs have big return on investment during COVID-19 pandemic<\/strong><\/a>
\nA Rochester economist says the conflict between health priorities and economic policies can create spiraling crises in emerging market nations.<\/span><\/div>\n
\"chartWhat will it take to restore the economy after COVID-19?<\/strong><\/a>
\nNarayana Kocherlakota, the Lionel W. McKenzie Professor of Economics, says the prospects for economic recovery depend on how effectively we can combat COVID-19.<\/span><\/div>\n
\"personReopening the country will do little to restore the US economy<\/strong><\/a>
\nRochester economist Lisa Kahn says multiple factors\u2014not just stay-at-home orders\u2014combined to generate the recent collapse in the labor market.<\/span><\/div>\n<\/div>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Those worst off will likely have to borrow money and then decide which obligations to pay right away and which to delay, says a Rochester economist.<\/p>\n","protected":false},"author":16,"featured_media":464952,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[456],"tags":[37592,23322,16072],"class_list":["post-464922","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-society-culture","tag-covid-19","tag-department-of-economics","tag-school-of-arts-and-sciences"],"acf":[],"yoast_head":"\nCOVID-19 is forcing state and local governments to prioritize financial obligations<\/title>\n<meta name=\"description\" content=\"Those worst off will likely have to borrow money and then decide which obligations to pay right away and which to delay, says a Rochester economist.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"COVID-19 is forcing state and local governments to prioritize financial obligations\" \/>\n<meta property=\"og:description\" content=\"Those worst off will likely have to borrow money and then decide which obligations to pay right away and which to delay, says a Rochester economist.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/\" \/>\n<meta property=\"og:site_name\" content=\"News Center\" \/>\n<meta property=\"article:published_time\" content=\"2020-12-18T17:05:32+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2021-06-28T20:00:49+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.rochester.edu\/newscenter\/wp-content\/uploads\/2020\/12\/fea-covid-local-govt.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1000\" \/>\n\t<meta property=\"og:image:height\" content=\"600\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Peter Iglinski\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@PiDaddy\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Peter Iglinski\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/\"},\"author\":{\"name\":\"Peter Iglinski\",\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/#\\\/schema\\\/person\\\/f7a217a901be900507c6e137448f5d5a\"},\"headline\":\"COVID-19 is forcing state and local governments to prioritize financial obligations\",\"datePublished\":\"2020-12-18T17:05:32+00:00\",\"dateModified\":\"2021-06-28T20:00:49+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/\"},\"wordCount\":686,\"image\":{\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/wp-content\\\/uploads\\\/2020\\\/12\\\/fea-covid-local-govt.jpg\",\"keywords\":[\"COVID-19\",\"Department of Economics\",\"School of Arts and Sciences\"],\"articleSection\":[\"Society & Culture\"],\"inLanguage\":\"en-US\"},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/\",\"url\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/\",\"name\":\"COVID-19 is forcing state and local governments to prioritize financial obligations\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/#website\"},\"primaryImageOfPage\":{\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/#primaryimage\"},\"image\":{\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/wp-content\\\/uploads\\\/2020\\\/12\\\/fea-covid-local-govt.jpg\",\"datePublished\":\"2020-12-18T17:05:32+00:00\",\"dateModified\":\"2021-06-28T20:00:49+00:00\",\"author\":{\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/#\\\/schema\\\/person\\\/f7a217a901be900507c6e137448f5d5a\"},\"description\":\"Those worst off will likely have to borrow money and then decide which obligations to pay right away and which to delay, says a Rochester economist.\",\"breadcrumb\":{\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/#breadcrumb\"},\"inLanguage\":\"en-US\",\"potentialAction\":[{\"@type\":\"ReadAction\",\"target\":[\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/\"]}]},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-US\",\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/#primaryimage\",\"url\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/wp-content\\\/uploads\\\/2020\\\/12\\\/fea-covid-local-govt.jpg\",\"contentUrl\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/wp-content\\\/uploads\\\/2020\\\/12\\\/fea-covid-local-govt.jpg\",\"width\":1000,\"height\":600,\"caption\":\"State governments depend on revenue from sales tax and income tax\u2014two areas that have been hit hard during the COVID-19 pandemic. (Getty Images photo)\"},{\"@type\":\"BreadcrumbList\",\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\\\/#breadcrumb\",\"itemListElement\":[{\"@type\":\"ListItem\",\"position\":1,\"name\":\"Home\",\"item\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/\"},{\"@type\":\"ListItem\",\"position\":2,\"name\":\"COVID-19 is forcing state and local governments to prioritize financial obligations\"}]},{\"@type\":\"WebSite\",\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/#website\",\"url\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/\",\"name\":\"News Center\",\"description\":\"Ä¢¹½´«Ã½\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/?s={search_term_string}\"},\"query-input\":{\"@type\":\"PropertyValueSpecification\",\"valueRequired\":true,\"valueName\":\"search_term_string\"}}],\"inLanguage\":\"en-US\"},{\"@type\":\"Person\",\"@id\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/#\\\/schema\\\/person\\\/f7a217a901be900507c6e137448f5d5a\",\"name\":\"Peter Iglinski\",\"sameAs\":[\"https:\\\/\\\/x.com\\\/PiDaddy\"],\"url\":\"https:\\\/\\\/www.rochester.edu\\\/newscenter\\\/author\\\/peter-iglinski\\\/\"}]}<\/script>\n<!-- \/ Yoast SEO plugin. -->","yoast_head_json":{"title":"COVID-19 is forcing state and local governments to prioritize financial obligations","description":"Those worst off will likely have to borrow money and then decide which obligations to pay right away and which to delay, says a Rochester economist.","robots":{"index":"index","follow":"follow","max-snippet":"max-snippet:-1","max-image-preview":"max-image-preview:large","max-video-preview":"max-video-preview:-1"},"canonical":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/","og_locale":"en_US","og_type":"article","og_title":"COVID-19 is forcing state and local governments to prioritize financial obligations","og_description":"Those worst off will likely have to borrow money and then decide which obligations to pay right away and which to delay, says a Rochester economist.","og_url":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/","og_site_name":"News Center","article_published_time":"2020-12-18T17:05:32+00:00","article_modified_time":"2021-06-28T20:00:49+00:00","og_image":[{"url":"https:\/\/www.rochester.edu\/newscenter\/wp-content\/uploads\/2020\/12\/fea-covid-local-govt.jpg","width":1000,"height":600,"type":"image\/jpeg"}],"author":"Peter Iglinski","twitter_card":"summary_large_image","twitter_creator":"@PiDaddy","twitter_misc":{"Written by":"Peter Iglinski","Est. reading time":"4 minutes"},"schema":{"@context":"https:\/\/schema.org","@graph":[{"@type":"Article","@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/#article","isPartOf":{"@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/"},"author":{"name":"Peter Iglinski","@id":"https:\/\/www.rochester.edu\/newscenter\/#\/schema\/person\/f7a217a901be900507c6e137448f5d5a"},"headline":"COVID-19 is forcing state and local governments to prioritize financial obligations","datePublished":"2020-12-18T17:05:32+00:00","dateModified":"2021-06-28T20:00:49+00:00","mainEntityOfPage":{"@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/"},"wordCount":686,"image":{"@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/#primaryimage"},"thumbnailUrl":"https:\/\/www.rochester.edu\/newscenter\/wp-content\/uploads\/2020\/12\/fea-covid-local-govt.jpg","keywords":["COVID-19","Department of Economics","School of Arts and Sciences"],"articleSection":["Society & Culture"],"inLanguage":"en-US"},{"@type":"WebPage","@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/","url":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/","name":"COVID-19 is forcing state and local governments to prioritize financial obligations","isPartOf":{"@id":"https:\/\/www.rochester.edu\/newscenter\/#website"},"primaryImageOfPage":{"@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/#primaryimage"},"image":{"@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/#primaryimage"},"thumbnailUrl":"https:\/\/www.rochester.edu\/newscenter\/wp-content\/uploads\/2020\/12\/fea-covid-local-govt.jpg","datePublished":"2020-12-18T17:05:32+00:00","dateModified":"2021-06-28T20:00:49+00:00","author":{"@id":"https:\/\/www.rochester.edu\/newscenter\/#\/schema\/person\/f7a217a901be900507c6e137448f5d5a"},"description":"Those worst off will likely have to borrow money and then decide which obligations to pay right away and which to delay, says a Rochester economist.","breadcrumb":{"@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/#breadcrumb"},"inLanguage":"en-US","potentialAction":[{"@type":"ReadAction","target":["https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/"]}]},{"@type":"ImageObject","inLanguage":"en-US","@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/#primaryimage","url":"https:\/\/www.rochester.edu\/newscenter\/wp-content\/uploads\/2020\/12\/fea-covid-local-govt.jpg","contentUrl":"https:\/\/www.rochester.edu\/newscenter\/wp-content\/uploads\/2020\/12\/fea-covid-local-govt.jpg","width":1000,"height":600,"caption":"State governments depend on revenue from sales tax and income tax\u2014two areas that have been hit hard during the COVID-19 pandemic. (Getty Images photo)"},{"@type":"BreadcrumbList","@id":"https:\/\/www.rochester.edu\/newscenter\/covid-forcing-local-governments-to-prioritize-financial-obligations-464922\/#breadcrumb","itemListElement":[{"@type":"ListItem","position":1,"name":"Home","item":"https:\/\/www.rochester.edu\/newscenter\/"},{"@type":"ListItem","position":2,"name":"COVID-19 is forcing state and local governments to prioritize financial obligations"}]},{"@type":"WebSite","@id":"https:\/\/www.rochester.edu\/newscenter\/#website","url":"https:\/\/www.rochester.edu\/newscenter\/","name":"News Center","description":"Ä¢¹½´«Ã½","potentialAction":[{"@type":"SearchAction","target":{"@type":"EntryPoint","urlTemplate":"https:\/\/www.rochester.edu\/newscenter\/?s={search_term_string}"},"query-input":{"@type":"PropertyValueSpecification","valueRequired":true,"valueName":"search_term_string"}}],"inLanguage":"en-US"},{"@type":"Person","@id":"https:\/\/www.rochester.edu\/newscenter\/#\/schema\/person\/f7a217a901be900507c6e137448f5d5a","name":"Peter Iglinski","sameAs":["https:\/\/x.com\/PiDaddy"],"url":"https:\/\/www.rochester.edu\/newscenter\/author\/peter-iglinski\/"}]}},"_links":{"self":[{"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/posts\/464922","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/users\/16"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/comments?post=464922"}],"version-history":[{"count":7,"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/posts\/464922\/revisions"}],"predecessor-version":[{"id":484642,"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/posts\/464922\/revisions\/484642"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/media\/464952"}],"wp:attachment":[{"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/media?parent=464922"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/categories?post=464922"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rochester.edu\/newscenter\/wp-json\/wp\/v2\/tags?post=464922"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}