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
How many people are flying? Has traveled picked up?
Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.
How are Americans feeling about their finances?
Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.
Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.
What’s going to happen to retailers, especially with the holiday shopping season approaching?
A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.
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