We talk a lot about the national economy, but cities and states have many of the same concerns and responsibilities for managing their money, too! Also like the national economy, city and state governments have to make smart choices in order to get everything done that needs to be done without running out of money.
Aaaaaand there we have a problem - elected representatives having to make smart choices with taxpayer money! Unfortunately, a lot of big cities are heading for a monster iceberg with no sign of turning.
Here are Five Fast Facts on gloomy economic forecasts for big cities:
- 💰 Pandemic Irony - At the beginning of the pandemic, there were concerns that the shutdowns would also shutdown cities and states. The federal government stepped in and threw over $5 trillion taxpayer dollars everywhere, so local governments actually saw revenues go up! Naturally, politicians paid for ongoing programs with one-time money. What could go wrong?
- 🚂 The Gravy Train Is Over - But that didn’t last, the timeframe for using those dollars ends in 2026, and things haven’t gone “back to normal.” For one thing, many businesses changed completely - travel, lodging, tourism, and business-related things like conventions are still roughly 30% below pre-pandemic levels, so the sales tax revenue from all these things is shorter than a teenager’s attention span. Work from home jobs have made many buildings vacant (13%-20% depending on where you are) in an office apocalypse that has lots of big cities scrambling.
- 📈 The “I” Word - Inflation is a killer for local governments just like us normal folks, too. Costs are up an average of 6% for labor on things like construction materials, healthcare, office supplies, and more. With fewer tax dollars coming in and costs skyrocketing, a dollar today is worth 18% less than a pre-pandemic dollar.
- 😣 No Matter What You Call ‘Em… - Whether you use the term “illegal aliens,” “undocumented workers,” “migrants,” or anything else, all those folks streaming over our southern border are causing an additional drain on city and state resources. Providing housing, food, social services, and medical care ain’t free – to the tune of over $100 billion across all states – and that’s all paid for out of the same tax dollars mentioned above. And it doesn’t appear to be getting any better anytime soon, either.
- 🧓 Getting Older - Baby Boomers make up around a quarter of the workforce today, but they’re retiring in droves now - over 4 million each year for the next four years! That means fewer and fewer workers paying income taxes; it also means more and more adding to the already huge burden on social services and healthcare.
🔥Bottom line: This is not a comprehensive list of challenges for city and state governments, but it’s more than enough to prompt some serious conversation about how we’re going to start fixing some of these problems before they become catastrophic. And while most states have a decent “rainy day fund” there’s only so long they can lean on that before that money is gone, too. Most states are showing long term shortfalls now, and cities are likewise feeling the pinch (especially big ones). We need real solutions, not kicking the can down the road.
What do you think should be done?
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