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How Much Help Do State and Local Governments Need? Updated Estimates of Revenue Losses from Pandemic Mitigation

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  • Stephan D. Whitaker

Abstract

I estimate that state and local governments have lost $141 billion of revenue from all sources in fiscal year 2020 (FY20) due to the COVID-19 mitigation shutdowns. Under three scenarios of increasing severity, I estimate that state and local governments will need to cut expenditures by between $59 billion and $350 billion in fiscal year 2021 (FY21) to offset impending loses of revenue. Some of the revenue losses can be offset by the rainy day funds that state and local governments have set aside during the expansion, but jurisdictions that lack a fiscal buffer may face painfully deep service cuts. This data brief updates and improves upon the estimates in the District Data Brief published on May 13, 2020. In these new estimates, I include all revenue sources that are likely to decline; the original brief covered only income and sales taxes.

Suggested Citation

  • Stephan D. Whitaker, 2020. "How Much Help Do State and Local Governments Need? Updated Estimates of Revenue Losses from Pandemic Mitigation," Cleveland Fed District Data Brief 88241, Federal Reserve Bank of Cleveland.
    • Handle: RePEc:fip:c00003:88241
    DOI: 10.26509/frbc-ddb-20200629
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    Cited by:

    1. Gerson Javier Pérez-Valbuena & Paula Barrios, 2022. "Subnational fiscal accounts under pressure: the effects of COVID-19 in a developing country," Documentos de trabajo sobre Economía Regional y Urbana 306, Banco de la Republica de Colombia.
    2. Clemens, Jeffrey & Veuger, Stan, 2021. "Politics and the distribution of federal funds: Evidence from federal legislation in response to COVID-19," Journal of Public Economics, Elsevier, vol. 204(C).
    3. Qiongzhi Liu & Jing Ren, 2023. "Local Fiscal Pressure and Enterprise Environmental Protection Investment under COVID-19: Evidence from China," Sustainability, MDPI, vol. 15(6), pages 1-20, March.
    4. Ivanov, Ivan T. & Zimmermann, Tom & Heinrich, Nathan W., 2022. "Limits of disclosure regulation in the municipal bond market," CFR Working Papers 22-05, University of Cologne, Centre for Financial Research (CFR).
    5. Jeffrey Clemens & Benedic Ippolito & Stan Veuger, 2021. "Medicaid and fiscal federalism during the COVID‐19 pandemic," Public Budgeting & Finance, Wiley Blackwell, vol. 41(4), pages 94-109, December.
    6. Clemens, Jeffrey & Hoxie, Philip & Kearns, John & Veuger, Stan, 2023. "How did federal aid to states and localities affect testing and vaccine delivery?," Journal of Public Economics, Elsevier, vol. 225(C).
    7. Jeffrey Clemens & Philip G. Hoxie & Stan Veuger, 2022. "Was Pandemic Fiscal Relief Effective Fiscal Stimulus? Evidence from Aid to State and Local Governments," NBER Working Papers 30168, National Bureau of Economic Research, Inc.
    8. Nora Gordon & Sarah Reber, 2021. "Were Federal COVID Relief Funds for Schools Enough?," NBER Chapters, in: Tax Policy and the Economy, Volume 36, pages 123-157, National Bureau of Economic Research, Inc.
    9. Green, Daniel & Loualiche, Erik, 2021. "State and local government employment in the COVID-19 crisis," Journal of Public Economics, Elsevier, vol. 193(C).
    10. John Bagley & Nicholas Fritsch & Shawn Nee, 2021. "Municipal Markets and the Municipal Liquidity Facility," Working Papers 21-07, Federal Reserve Bank of Cleveland.

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    Keywords

    COVID-19;

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