State and Local Recovery Recommendations and Actions

State and Local Recovery Recommendations and Actions

Center for Financial Markets and COVID-19

Even before the current COVID-19 crisis, state and local government was already under fiscal stress—down 71,000 employees since January 2009 and $280 billion in lost funding since the 2008 crash. Now new estimates from the Center on Budget and Policy Priorities are predicting local and state deficits of $500 billion or more. Because the three million employees in the state and local economic sector are at the frontlines of short-term COVID-19 crisis management and essential to long-term economic recovery, we should all work to ensure that the economic stimulus package includes both short-term and long-term assistance for state and local governments. State and local communities will need ongoing support to maintain essential public services in the next six months and build a resilient recovery in the years after that utilize public-private partnerships.

  • Develop new revenue sharing strategies to support essential and sustainable public services. We are working with federal, state, and local leaders to ensure that any economic stimulus package includes targeted and flexible emergency assistance for state and local governments. This includes discussions about how a return to General Revenue Sharing (used from 1972-1986) could offer direct federal support to state and local governments with a greater deal of speed and flexibility than other available programs. This program could be managed directly by the US Treasury. We are also developing new options to ensure that the new Municipal Liquidity Facility managed by the Federal Reserve offers equitable re-financing access to smaller and medium-sized cities and counties.

  • Create a public-private community solutions team at the Treasury Department to support long-term recovery through financial innovation. To build a foundation for long-term economic recovery, CFM is working to lift up the importance of capacity-building incentives to stretch public investment impact using public-private partnerships. Recognizing that this funding gap would affect essential public services and distressed communities during the next recession, CFM created a new public sector financial innovation practice area in 2019 to develop action-oriented research, trainings, and policy development to help communities learn how to better leverage public investment through public-private partnerships, impact capital, and Opportunity Zones (OZs).

  • Release a comprehensive local economic development playbook to help train public sector leaders on how to leverage public investment dollars and build economic resilience. CFM will soon publish an economic resilience playbook to help local leaders leverage public investment to maximum effect using best practices in procurement, economic development and the use of public-private partnerships.