How should local leaders use their US bailout funding?
Of the $ 1.9 trillion in federal COVID-19 relief in the new American Rescue Plan Act is $ 350 billion for “Coronavirus State and Local Budget Recovery Funds”. At about one-fifth of the total cost of the bill, these funds will be rolled out to states and local governments in two installments (the first within 60 days and the second one year after this initial allocation) to mitigate the budgetary impact of COVID. -19. pandemic.
For many cities and counties, the state and local American Rescue Plan (ARP) funds are not just a $ 350 billion lifeline; they represent the biggest positive fiscal shock to their budgets in decades. Now a rush is underway to determine how best to deploy the money. Decisions made in the coming weeks – and over the next year on the second round of funding – will determine whether cities will only benefit from a brief stimulus or whether they embark on a new trajectory of inclusive economic growth.
The stakes are high. The money has to move fast and be deployed intelligently and fairly. In 10 years, we could go back to this period and ask: Which places have just spent their money and which places have invested it?
Based on our fieldwork in Northeast Ohio and Birmingham, Alabama, we believe elected officials – and the civic, business, philanthropic and community stakeholder networks around them – should embrace a three-pronged approach to using their ARP funding: stabilize, strategize and organize.
Stabilize. ARP provides state and local governments with the resources to stabilize their operating budgets. Many governments ran large deficits in 2020 as the economic downturn hurt tax revenues and local governments bore significant costs related to the pandemic. To address this imbalance, many cities have cut back on essential services: first responders, sanitation workers, planning staff and other government employees have faced reductions in hours and delays. leave. Other governments have cut contracts with agencies providing vital social services.
Local government deficits will vary widely across the United States, due to the disparate economic impact of COVID-19 and the way cities collect revenue. Birmingham, for example, is heavily dependent on sales tax and tax revenue, and experienced a shortfall of $ 63 million in fiscal year 2021. Much of the first half of the planned ARP allocation the city’s $ 149 million will fill that hole.
Not all governments are in a similar fiscal position. In northeast Ohio, the city of Lorain recorded a small surplus in 2020 and has a budget of $ 29 million for 2021. Lorain’s estimated ARP allocation is $ 31 million. In other cities in northeast Ohio, ARP allocations range from 24% to 65% of 2021 budgets. And while the money will come over two years, that’s a lot of help.
Develop a strategy. In addition to direct government services, ARP enables cities to invest in infrastructure and launch programs to support workers and small businesses. These investments can be spent directly by public entities or channeled through non-profit organizations. The scale and flexibility of funding suggests that local governments should be strategic in deploying any ARP funds that go beyond basic fiscal stabilization. When making investments, local leaders should consider four factors:
- Immediacy. People and businesses are hurting. Businesses need capital to reopen their doors, and people need awareness and skills development to match them with available jobs. While it is important to consider the impact of an investment beyond the immediate term, providing such immediate assistance is a necessary basis for a longer term recovery.
- Inclusiveness. An important lesson from last year’s CARES law is that the very rapid movement of resources in existing systems can exacerbate economic and racial inequalities. Many minority-owned microenterprises have not had access to loans under the federal government’s Paycheck Protection Program due to lack of awareness, lack of connectivity and discrimination pure and simple. Recognizing this inequality, ARP provides funding to “Community Navigators” to ensure equitable access to capital and technical assistance. This approach can work, but requires organizational coalitions that have legitimacy and reach across a wide range of communities. In Cleveland, the coalition’s approach helped the local Urban League’s small loan support program qualify for federal funding in the form of a revolving loan fund. In Summit County, the largest county in the Akron, Ohio area, the Vice President of Opportunities and Inclusion of the Greater Akron Chamber of Commerce – a local leader with close ties to the community Black – was instrumental in delivering $ 13 million in small business funding under the CARES Act to 3,000 businesses, including 94% of qualifying black-owned businesses.
- Future prosperity. Localities will receive two ARP disbursements over one year, but they have until the end of 2024 to spend all funds. This gives local leaders the opportunity to invest in future growth and prosperity, the impacts of which will extend beyond short-term spending needs. A forward-looking effort is emerging in Birmingham, where the University of Alabama at Birmingham (UAB), local workforce training organizations, public health officials and health sector employers will train and employ community health workers to provide access to vaccines. Under this plan, program participants would be paid to work in community health clinics and conduct community outreach activities for 20 hours per week. For the other half of the week, they would be paid to take training in one of three health-related career paths that set them up for a post-pandemic career. Another example is the “R7” Pandemic Response Plan from MAGNET, the Manufacturing Extension Partnership in Northeast Ohio, which used CARES Act resources to help local manufacturers “restart” safely, to “relaunch” using Industry 4.0 technologies, to “refocus” on new products and markets, “reconnect” in new ways throughout the supply chain, ” requalify ”workers,“ redistribute ”production from abroad and“ re-secure ”operations through the transformation of cybersecurity. The R7 plan and health workers “Win and learn” model can immediately help businesses and workers while influencing their long-term production potential.
- Complementarity. Ideally, ARP investments can boost strategies already underway. For several years, several Cleveland players have worked together to ensure positive economic benefits from the Opportunity Corridor, a $ 350 million road project through one of the most economically disadvantaged neighborhoods in the country. The city, foundations, regional chamber and others have worked with the Local Community Development Corporation (CDC) to purchase and remediate land in the hopes of bringing medium-skilled and family supportive jobs back to this promising part of the city. the city. The CDC’s vision is to create a food technology hub that leverages the region’s many food-related assets in a business accelerator with shared production and storage infrastructure, a seed fund to support various entrepreneurs and a workforce development center to prepare people to achieve and advance in a career. Parts of the ARP managed by the Economic Development Administration (EDA) and the Ministry of Agriculture have programs that could support such initiatives; the city and county should consider how their allocation could be used to supplement this work.
Last summer, Brookings Metro released a compendium which provides local leaders in government, business, nonprofits and higher education – as well as their state partners – with a stimulus framework and a set of nine concrete ideas to build better, as well as more than ‘a dozen case studies on the main local and state investments in economic recovery.
Organize. As ARP money circulates through cities and counties, the most effective officials know its deployment will require a team. Based on a proposal from our colleagues Mary Jean Ryan and Alan Berube, “Regional Recovery Coordination Councils” can execute strategic investments and monitor impact. These councils should be public / private partnerships comprising small businesses, neighborhood leaders, social service agencies, philanthropic leaders and business leaders. They would be responsible for aggregating and supplementing existing recovery plans, setting goals, recommending investments and monitoring results.
These councils can also play a role well beyond the local government allocations of the ARP. They can identify and exploit relevant opportunities in the many other parts of the $ 1.9 trillion legislation, such as education, public transportation, small businesses (especially restaurants), and affordable housing. Boards can also coordinate responses to potentially important future federal infrastructure and innovation legislation, and determine what complementary actions can act as force multipliers.
In addition, a council can serve as a unified voice to liaise with implementing agencies. For example, during the CARES Act, a consortium of Cleveland-based institutions came together to share an organized list of priorities with the ACN regional office around the economic adjustment assistance program. The model has worked well for both parties and continues to this day. Likewise, ARP funding is a major strategic focus of a new collaboration called Prosper Birmingham, which is developing a regional investment program under the leadership of community leaders, city and county elected officials, CEOs of business, philanthropic and university presidents, and entrepreneurs and small businesses. the owners.
An opportunity to act
Before the adoption of the US bailout, it was not clear whether cities and counties would receive the financial resources they needed to recover from the pandemic and recession. Now that the funding is secure, it is time to act. Local coalitions can stabilize their communities, jointly develop strategies to invest in future prosperity, and organize to enable an inclusive recovery from COVID-19.