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As the coronavirus pandemic lingers and our national economy remains largely shut down—a painful but necessary step to protect our population’s health and safety—financial catastrophe looms for state and local governments.
Economically sensitive revenues have dried up, COVID-19 expenses are mounting and the demand for services has skyrocketed. The federal government has provided states with critical funds to cover coronavirus-related expenses and some other priorities. However, much more support will be needed to achieve a comprehensive national economic reboot.
University of Pennsylvania Professor Robert Inman recently projected that U.S. states and their local governments will lose $275 billion in sales and income taxes in the coming fiscal year—a 20 percent decline. California officials anticipate an upcoming $54.3 billion deficit that would deplete the state’s rainy day fund multiple times over. Illinois faces a shortfall of as much as $7.4 billion next fiscal year as a result of ongoing economic disruption. Chicago, Peoria, Rockford and cities in every state are experiencing similarly dramatic revenue losses.
While some entered the pandemic in stable financial condition, and some much less so, all of our state and local governments are now or will soon be in major distress. No state or local government can be faulted for the economic calamity caused by the coronavirus. Nor does any state or local government have the capacity to weather this crisis on its own.
The U.S. government is the only entity that can—and therefore must—take action to help all of its governments. Calls to exclude the Illinois, Chicago or other major governments from future rounds of relief because of past bad fiscal decisionmaking are misguided and threaten full national economic recovery.
Our city and state continue to face financial and governance challenges of their own creation. Entire columns can be (and have been) written on what our state and city need to do to help themselves: pension reform; increased efficiencies, property tax relief, government consolidation.
However, as the nation’s fifth largest economy, Illinois serves as an essential hub for national and international commerce. And as Illinois’ economic engine, Chicago supports substantial portions of not only the State of Illinois’ economy but also the Midwest and national economies.
Providing revenue recovery funds to states and local governments does not reward Illinois, Chicago or any other government for reckless past practices. Rather, it is a commitment to establishing a robust national recovery—in this instance by helping stabilize one of the the country’s largest economies and the Midwest’s economic engine.
Billions in needed replacement revenue support will only get Illinois governments back to a baseline at best and give our state and city a fighting chance to recover. In order to achieve the strongest possible recovery and to ultimately grow their economies, it will still be left to Illinois and Chicago to take the necessary next steps to get their financial houses in order.
Laurence Msall is President of the Civic Federation, a government watchdog group in Chicago.
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