As was the case with the Great Recession in 2008, this current economic downturn has impacted communities of color, rural communities, and disinvested communities the hardest. As we move forward with the recovery from the past year and a half, it’s time that we turn our attention to how our state and local governments can meet the challenge of fostering a sustainable and equitable recovery for all.
Since the spring of 2020, Congress has authorized $5 trillion in stimulus funding and $500 billion for state and local governments. This funding has been doled out to states to aid the pandemic response in the wake of severe declines in state and local government revenues, which was exacerbated by the need for greater spending to counter the impacts of the pandemic. States and municipalities spent tremendous sums on public health needs, public safety, safety net program needs, and associated programming costs.
During the 2008 recession, the nation saw a federal fiscal response in the form of the American Recovery and Reinvestment Act, which authorized billions in State Fiscal Stabilization Fund (SFSF) dollars to contend with a global economic catastrophe. However, in the ensuing years, there were some problematic issues that emerged as those funds were depleted.
Officials in state and local governments resorted to a range of unsustainable budgetary actions that resulted in tremendous fiscal cliffs across a number of states (massive falloffs in funding for state programs after the federal funds were expended). The underlying budgeting strategies included a mix of funding long-term initiatives with short-term money and shifting state dollars away from programs preferring to use federal dollars instead. In doing so, officials placed themselves in a financial bind.
For states that didn’t experience a rapid economic rebound, the prospect of budget cuts became increasingly likely. States enacted tax cuts that were aimed at stimulating their economies. However, funding these tax cuts meant steep cuts to education and other services. Five years after the recession ended, state and local funding in education, public health, public safety, along with healthcare and other programs were underfunded relative to their 2008 levels. In some states, there are already debates emerging regarding supplantation and siphoning of federal funds. To avoid a repeat of the past, it is imperative that we arm local elected leaders with a set of actionable strategies for guarding against shortchanging the communities hit hardest by the pandemic.
 While this represents the direct funding to states and taxpayers, the federal government has undertaken a number of fiscal measures to address the pandemic including monetary policy adjustments, regulatory policy changes, housing policies, and other measures. For a summary see Investopedia – US COVID 19 Stimulus and Relief.