With COVID-19 slowing local economies, cities and towns may need to tap rainy day funds
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The COVID-19 outbreak is likely to set off a long chain of economic dominoes. One possibility is that cities and towns might need to tap into their rainy day funds — the money they set aside for emergencies and economic downturns.
Here’s the bad news: There are many ways city finances will be affected by this crisis. Take airports, for example: They’re slowing down as airlines cut flights and people decide not to travel.
Bill Glasgall at the Volcker Alliance says cities collect fees and sales taxes from airports. Plus, “as people stay home, don’t want to be in a crowded store, sales tax revenues are going to be affected,” Glasgall said.
If people see their hours cut because they can’t get to work, that’ll mean less revenue for the cities that tax income.
All of this could make it harder for cities to pay for the services that their residents need, especially now.
Justin Marlowe at the University of Washington had some good news to share, though.
“Since the Great Recession, local governments have been deliberate about building their rainy day funds,” he said. “They’ve adopted formal rainy day fund policies.”
A recent report from Moody’s looked at the 25 biggest cities in the U.S. and found that most of them have built up enough reserves to get through a recession as severe as the last one.
COVID-19 Economy FAQs
So what’s up with “Zoom fatigue”?
It’s a real thing. The science backs it up — there’s new research from Stanford University. So why is it that the technology can be so draining? Jeremy Bailenson with Stanford’s Virtual Human Interaction Lab puts it this way: “It’s like being in an elevator where everyone in the elevator stopped and looked right at us for the entire elevator ride at close-up.” Bailenson said turning off self-view and shrinking down the video window can make interactions feel more natural and less emotionally taxing.
How are Americans spending their money these days?
Economists are predicting that pent-up demand for certain goods and services is going to burst out all over as more people get vaccinated. A lot of people had to drastically change their spending in the pandemic because they lost jobs or had their hours cut. But at the same time, most consumers “are still feeling secure or optimistic about their finances,” according to Candace Corlett, president of WSL Strategic Retail, which regularly surveys shoppers. A lot of people enjoy browsing in stores, especially after months of forced online shopping. And another area expecting a post-pandemic boost: travel.
What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?
Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”
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