The National Association of Counties estimates, “The COVID-19 pandemic has the potential to impact county budgets by over $144 billion through fiscal year 2021.” Additionally,

Large counties with over 500,000 residents would see the largest increase in expenditures and the largest decrease in revenue, amounting to an approximately $83 billion impact. However, small counties with less than 50,000 residents would have their budgets impacted the most. Between lost revenue and increased expenditures, in total, small counties may see a nearly one quarter (24 percent) percent reduction in their budgets.

Only counties (and cities) with populations of at least 500,000 are eligible for the $150 billion in federal aid funding for state and local governments in the CARES Act (this funding may only be used for COVID-19-related spending). Last week, the National Association of Counties, National League of Cities, and United States Conference of Mayors asked Congress for $250 billion “in robust, dedicated, and flexible funding for all local governments.” Additionally, “We strongly urge that funding provided in the interim package allow for local governments to make up for lost revenue, and further that there be language in the interim package clarifying that CARES Act funding can be used for the same purpose.” (This mirrors the $500 billion request from the National Governors Association, which also asked for CARES Act clarification that funds may be used for revenue shortfalls.)

No such funding for state and local governments is included in the new package being considered in Congress this week.

In Route Fifty, Bill Lucia writes,

. . . the longer-term fiscal outlook for states and localities is murky. It’s unknown how much longer the business closures and stay-at-home orders public officials have enacted to control the disease will last, or how quickly or strongly the nation’s economy will rebound after they’re lifted.

“Everybody’s talking about how to get rescued. So far there’s been little talk about whether the scope of services that government provides is to be reexamined and reduced,” said Richard Ravitch, a former New York lieutenant governor, who has had a hand over the years in resolving a number of high-profile situations involving state and local government financial stress.

“I think that as the next weeks unfold you’ll see a significant effort on the part of some to reduce services,” Ravitch added, during a conference call held by the Volcker Alliance on Thursday.

Indeed, some governments here in Washington are beginning to at least freeze some new spending. Gov. Inslee vetoed some new policies that had been passed by the Legislature this year before funds could be spent. And last week, the Office of Financial Management directed agencies “to identify savings to offset revenue losses this biennium.” Some examples of potential savings: efficiencies, program reductions, implementation delays, and hiring delays. Further, “Steep revenue drops may require a direct and immediate response to capture significant cuts and savings in all accounts that can be included in a second supplemental budget for the current biennium and the 2021-23 biennial budget.”