2020 City Fiscal Conditions Report: Financial Health of America’s Cities, Towns and Villages On the Brink

In its 35th year, NLC released the 2020 City Fiscal Condition Report during a virtual release event with special guest and Chief Economist, Dr. Mark Zandi of Moody’s Analytics. Findings in the report reveal that America’s cities are experiencing the fiscal consequences of this pandemic-downturn at an unprecedented speed – and like recent recessions, it will take years for municipal budgets to recover from the impact of COVID-19. This is the unfortunate reality that local leaders are facing from coronavirus and the increasing revenue loss cities, towns, and villages are facing.

Key takeaways from the report:

  • Nearly 90% of cities will be less able to meet the fiscal needs of their communities in fiscal year 2021 than in fiscal year 2020. We have not seen a lack of fiscal capacity reported like this since the low point of the Great Recession.
  • Budget estimates for 2020, which were collected only two months after the pandemic started, demonstrate the immediate impact coronavirus had on sales and income revenues.
  • All major local tax revenue sources slowed in fiscal year 2020, with severe year-over-year-declines in sales (-11%) and income tax (-3.4%) receipts, and on average, cities anticipate a 13% decline in fiscal year 2021 general fund revenues over fiscal year 2020.

As the event continued, Dr. Mark Zandi, shared his expertise which discussed the grave fiscal impact of the coronavirus pandemic on America’s cities, towns and villages and the broader impact of local fiscal health on national economic recovery.

            “Aid to state and local governments is a particularly efficacious way to support the economy… The single most effective way to support the economy, bottom line, the top of the list of things that lawmakers need to do for pandemic recovery … is providing that support to state and local governments. Without it, state and local governments will have to cut millions of jobs and make it very difficult to return to full employment.”  

“That’s why we have the federal government… to step in and provide that necessary support to make sure things don’t evaporate. State and local governments are here because this is a catastrophic event. That narrative that we are bailing cities out is a false one.”

“This isn’t a problem in one part of the country. We’re not talking about an issue in New England or Southern California – it’s coast to coast. It doesn’t matter where you are, you got hit hard by this. Every city and state is struggling, some more than others, but every corner of the country is struggling with this and needs help.”

Concluding the 2020 City Fiscal Condition Report release event, local leaders were even committed to calling on Congress for direct federal funding for America’s hometowns and move the economy forward.

To see a recorded version of the event, please click here.

To download a copy of the report, please click here.

About the Authors:

Jasmine Smith is the senior digital content specialist at the National League of Cities.

Christiana McFarland is NLC’s Research Director. She leads NLC’s efforts to transform city-level data into information that strengthens the capacity of city leaders and that raises awareness of challenges, trends and successes in cities. Follow her on Twitter @ckmcfarland.