NLC’s 2022 City Fiscal Conditions Report Examines Cities’ Financial Health & Post-COVID Recovery 

WASHINGTON, DC – In the last two years, America’s cities, towns and villages have experienced some of the most dramatic fiscal downturns in their histories. Now in its 37th year, NLC’s City Fiscal Conditions report presents a snapshot of where cities are financially as they turn the page on the COVID-19 fiscal downturn and get back on their feet. 

For some, the sudden drop in revenues stemming from the pandemic overshadowed even the most negative fiscal impacts of the Great Recession of 2008. However, thanks to crucial federal support in the form of American Rescue Plan Act (ARPA) funds and the passage of the Bipartisan Infrastructure Law, local governments across the nation have been able to address their most critical community needs, avoiding what could have been years of financial struggle to balance their budgets. 

“This report underscores how crucial federal funds from the American Rescue Plan Act (ARPA) have been to local governments across the nation, ensuring that critical services continued and preventing what would have been years of fiscal struggle,” said NLC CEO and Executive Director Clarence E. Anthony.  

Among the report’s key findings: 

  • Multiple factors, many tied to COVID-19 recovery efforts, have put municipal governments on the right track for recovery in fiscal year 2022: a strong rebound of city revenue sources such as income and sales taxes, two years after the start of the COVID-19 outbreak in 2020, coupled with a once-in-a-generation and timely injection of federal monies in the form of American Rescue Plan Act (ARPA).  
  • Additionally, strong housing market activities over the past two years promised yet another positive trend in city revenues for the fiscal year 2022.  
  • The looming fear of another recession led many municipal governments to implement conservative approaches to their 2022 budgets, adjusting their revenue and expenditure estimates based on the current micro as well as macro-economic factors.  
  • Looking beyond 2022, although cities continue to face fiscal and economic uncertainties and challenges, there remains hope as the federal government continues to play its crucial role in helping municipalities meet their communities’ needs. The State and Local Fiscal Recovery Funds (SLFRF) remain a crucial part of cities’ plans to regain pre-Covid fiscal health.  
  • The Federal Reserve’s active monetary policymaking in the form of increasing interest rates has already borne fruit as inflation rates (at the time of this writing) are slowly but surely falling back to normal levels. 

Considering all of these favorable indicators, it is no surprise that nearly 9 out of 10 finance officers surveyed by NLC expressed optimism in their ability to meet fiscal needs in their current fiscal year 2022. However, despite relatively positive trends observed in fiscal year 2021, cities, towns and villages still face an uphill battle as abnormally high inflation rates have nearly cancelled out the tax revenues these governments gained in 2021. 

To read the full report, visit https://www.nlc.org/resource/city-fiscal-conditions-2022/

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The National League of Cities (NLC) is the voice of America’s cities, towns and villages, representing more than 200 million people. NLC works to strengthen local leadership, influence federal policy and drive innovative solutions. Stay connected with NLC on Facebook, Twitter, LinkedIn and Instagram