In March 2020, as the coronavirus pandemic took hold, the U.S. economy went into free fall. Retail sales plummeted, unemployment skyrocketed, businesses shuttered, uncertainty abounded. The fiscal impact of these swift economic changes were felt immediately in cities across the country. Sales and income tax revenues were the first to be hit, and cities that rely on these sources, like Cincinnati, OH and Tulsa, OK, were forced to take immediate draconian actions.1 Even property tax revenues, which typically take longer to respond to economic changes, started showing signs of weakening as economic hardship dampened real estate demand and the ability of many to afford their mortgage.
Given that most cities’ FY 2020 budget captures only a couple of months of the pandemic recession, FY 2020 more closely represents a pre-recession baseline of city fiscal conditions for most cities. FY 2021 budgets (which start for many cities in July 2020) begin to more fully capture the fiscal impacts felt by cities across the country. As the virus persists, the toll on city finances is set to be more severe than that experienced during the Great Recession.
