The start of municipal budget issues due to COVID-19? The case of Chicago

COVID-19 has disrupted a lot of life in the United States and it will have consequences for municipal budgets. Here is how Chicago mayor Lori Lightfoot describes the fiscal impact:

Google Street View of Chicago City Hall, June 2018

Citing the “catastrophic collapse of our local and national economy” because of COVID-19 and damage to local businesses from civil unrest, Mayor Lori Lightfoot on Monday laid out a $1.2 billion shortfall for what she called Chicago’s “pandemic budget” in 2021…

The ongoing coronavirus crisis has also spiked the 2020 budget shortfall to nearly $800 million, Lightfoot said. She said that deficit would be filled using relief funds and other unspecified aid from the federal government, in addition to debt refinancing, and borrowing…

In laying out the 2021 shortfall, Lightfoot cited dire numbers — more than 900,000 Chicago-area residents filed for unemployment since the start of the pandemic, while personal services, hospitality and tourism industries “are still seeing a fraction of their typical revenues and some businesses have sadly closed with no hope of coming back.”…

The bad news has seemed inevitable for months, as tax receipts plummeted with large parts of the economy shut down and spending in Chicago by tourists and conventioneers cratered throughout the summer because of the pandemic.

Chicago has its own particular challenges but the COVID-19 shortfall is one that many communities in the United States, big and small, will experience. Local governments tend to want to diversify their tax base so that they are drawing tax revenues from multiple sources. COVID-19 interrupts or limits a number of these streams: money from visitors (who stay in hotels, visit sites, eat), sales tax revenues (derived from businesses from residents and visitors, who are affected by employment and travel opportunities), and property tax revenue (could be affected if people are moving in or out affecting demand plus whether residents and landlords are able to pay their bills). Furthermore, right now this is posed as an issue for the current budget; what is the effect for months or years down the road as cities and communities try to rebound and/or continue to battle COVID-19?

Closing these COVID-19 shortfalls will provide unique opportunities for politicians. This article suggests all options are on the table; yet, I am sure most, if not all of the politicians involved, have particular budget options they would not consider. Many municipal governments will hope there are extra resources available from above, perhaps from the county, state, and federal governments. Yet, all levels of government are likely to feel the impact of COVID-19. And with the current discord between the White House and big city leaders, it is hard to imagine what a palatable plan for the federal government and municipal governments to work together would look like. Could this/should this be a major issue on the November 2020 campaign trail as multiple levels of government look to address COVID effects?

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