Five Things States and Localities can be Thankful for This Year

There’s no question that it’s been a remarkably tough time for state and local governments for over eighteen months now. Confronting the pandemic has been an extraordinary challenge – one of the few in memory that has taxed the capacity of governments in all fifty states and Washington D.C. And times are certainly still difficult right now. Partisan politics is playing hob with our ability to govern effectively and civilly. Forecasts call for upticks in the rate of Covid. Crime rates have been rising.

But with Thanksgiving coming up this Thursday, we thought it would be only appropriate to sit back, take deep breaths and consider some of the reasons why mayors, governors, selectmen and all the people who work for them, might be grateful. Here are the five that came to mind:

1) The Infrastructure Act. For years now, we’ve been writing about the fact that decaying infrastructure in this nation is one of the most troublesome long-term liabilities around. When roads, bridges, buildings, and water pipes aren’t properly maintained, it inevitably will cost more in years to come. Eventually, the work needs to be done –or run the risk of bridges collapsing or potholes growing to be the size of minivans. While there are going to be all sorts of obstacles on the way to spending this money effectively and efficiently, these are the kinds of challenges that states, and localities can just wish for.

2) Surprisingly robust revenues have allowed states to set aside healthy rainy day funds. As the Pew Charitable Trusts recently reported, “Unprecedented federal aid and smaller-than-anticipated tax revenue shortfalls have allowed the majority of states to avoid tapping their rainy day funds since the outset of the pandemic-driven recession in early 2020. After a one-year dip, states’ combined fiscal cushion—counting rainy day funds and leftover budget dollars—was expected to spring back and exceed pre-pandemic highs by the start of this budget year.

3) A growing awareness of the need for equity, diversity and inclusion. This is a tricky one, indeed. Although there have been a series of incidents around the country that make it appear that implicit and explicit racism is epidemic, a number of them have functioned as wake-up calls to states, counties and cities. And although there's a long road ahead, real changes are being made, just beginning with the growing use of so-called equity budgeting. As we wrote in Route Fifty, "A growing number of cities are turning to their budget offices to help treat historically underserved communities more fairly." This trend has accompanied another -- the appointment of chief equity officers in Washington D.C., Denver and many other places.

4) The discovery of the advantages of remote working. While a handful of places, notably Tennessee, have acknowledged the benefits of remote working for some time, it became a necessity for many places during the pandemic. While this took a great deal of adjustment for governments and for workers, and it has certainly had its downsides, remote work appears to be here to stay – at least in a hybrid fashion in which people work from home a few days a week. A few of the benefits include: 1) Savings on the cost of leasing or maintaining government office space 2) Reduced carbon emissions as fewer people are taking their cars to work and 3) A kind of workplace flexibility that is being used as an incentive to draw applicants to hard-to-fill public sector jobs.

5) Thanks to a combination of reforms and a booming stock market, state and local pension plans – one of the great long-term threats to their fiscal stability – are in better shape than they’ve been for at least a decade. Again, we’ll turn to Pew for the data to back up this this comment. As it wrote back in September, “The nation’s state retirement systems finished the 2021 fiscal year in their best condition since the Great Recession of 2007-09 . . .Pew estimates that state retirement systems are now over 80% funded for the first time since 2008.

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