CITIES ON THEIR OWN: LOCAL REVENUE WHEN FEDERALISM FAILS.

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Author: Erin Scharff
Date: Apr. 2021
From: Fordham Urban Law Journal(Vol. 48, Issue 4)
Publisher: Fordham Urban Law Journal
Document Type: Article
Length: 10,791 words
Lexile Measure: 1870L

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Introduction 919 I. Fiscal Federalism in Decline 923 A. Fiscal Federalism 923 B. Responsibility Without Fiscal Authority 927 II. Making Ends Meet 930 A. Other Revenues 930 B. Other Budget Options: Borrowing and Shifting Funding Priorities 937 III. A Way Forward 944 Conclusion 947

INTRODUCTION

As I write in the winter of 2020, the health, fiscal, and, frankly, humanitarian crises confronting U.S. cities continue unabated. The COVID-19 pandemic has required local governments to spend more to retrofit public spaces, increase cleaning frequency and protocols, and expand the work of public health departments. In addition, many local communities have allocated funds to address deepening problems of poverty and hunger and have provided cash assistance to struggling local businesses. (1) Meanwhile, local revenue collections shrank significantly. While not as deep as predicted in March 2020, cities face considerable budget shortfalls. To take a few headline numbers, New York City faces a $3.8 billion shortfall; (2) in October 2020, Chicago predicted a $1.2 billion shortfall; (3) and as of December 2020, Los Angeles officials were struggling with a $675 million shortfall, (4) while San Diego faced an $86 million shortfall. (5)

The pandemic has been especially harsh on the economies of large urban areas. However, even smaller urban communities face significant shortfalls. (6) Meanwhile, a meaningful federal response was slow to materialize. In a functioning federalist system, one might expect the central state to quickly address state and local fiscal challenges that are national in scope. Not only would such funds ensure state and local governments had the money to invest in their responses to the pandemic, but they would also prevent public sector cuts that would otherwise deepen the economic recession. While Washington managed to pass one round of stimulus for U.S. workers and businesses, (7) local governments began making cuts almost immediately. (8) At least some political leaders in Washington seemed to believe that the current fiscal crisis confronting local governments is of their own making. (9) This kind of talk is obviously not grounded in reality, though budget decisions made prior to the pandemic limit local options to respond prudently. The American Rescue Plan passed in March of 2021 provides meaningful federal dollars to assist local governments with revenue shortfalls, but delays in this assistance complicated local governments' response to the pandemic. (10)

The current recession is an unlikely place to draw meaningful lessons about local fiscal health and local financial crises. The fiscal challenges currently confronting urban areas in the United States are sui generis. We are facing a global economic contraction, unprecedented since the Great Depression, driven by public health regulation and advice that discouraged consumer spending. (11) Rebuilding the economy requires an effective public health response, (12) and the speed at which urban environments will recover will depend on how quickly residents and tourists feel it is safe to resume normal life. Scientists have produced a miracle: vaccines that are 90% effective in record time. (13) But how quickly this miracle will result in meaningful public health...

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Gale Document Number: GALE|A663050694