Monday, January 04, 2021

Local governments face budget challenges in the new year; city-dwellers moving to the country could help

States, cities and counties nationwide are facing budget challenges as the coronavirus pandemic continues to exact an economic toll. Rural areas will likely be forced to deal with the effects for years to come, but the crisis may provide an opportunity for some to address long-neglected problems.

The newly approved stimulus package "does not include a giant new slug of direct aid state and local advocates pushed for. But it will inject billions of dollars into the economy to help businesses and households, including $284 billion for a forgivable loan program to help small businesses cover payroll, a $300 increase to weekly unemployment benefits and $600 one-time payments to many Americans," Bill Lucia reports for Route Fifty. The "$900 billion relief legislation will also pour additional aid into areas linked to state and local government. For example, K-12 schools will receive $54 billion, higher education gets $22 billion, around $14 billion will be sent to struggling transit systems, and billions will be spent on various vaccine-related initiatives."

But state and local budgets will likely struggle at least until economic activity gets back to normal, which will be influenced by Covid-19 vaccination rates, Lucia reports. Areas and states that rely more on oil production and tourism are particularly hurting, as are lower-wage workers, Lucia reports.

"At the local level, it could be well into 2021 or later before the damage the virus has caused to budgets becomes clear," Lucia reports. "There are also questions about the lasting marks for some local economies—for instance, if downtown offices will lose tenants if remote work continues or if businesses like restaurants and venues, hobbled by the pandemic, will be able to rebound.

A recent report from the U.S. Department of Agriculture adds to a growing body of research showing that rural areas will be burdened by the effects of the virus — economic, medical and social — for many years to come," Adam Minter reports for Bloomberg

Before the pandemic, many rural areas that relied on tourism and recreation were thriving, especially those with public-private investments in existing assets like classic Main Street buildings, Minter reports. The pandemic halted much of that revitalization, but city-dwellers looking to move to the country could provide an influx of people, jobs and real-estate revenue. 

"Attracting long-term urban relocations would not only help sustain the progress made in creating vibrant rural commercial districts," Minter writes. "It could also renew pressure on Washington to address problems — such as a lack of quality health care or widespread broadband — that were plaguing rural America long before the pandemic. That could help create a virtuous circle, made all the more urgent by the pandemic."

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