The passage of the $1.9 trillion COVID relief bill coincides with the one-year anniversary of the pandemic shutdown in America and the direct aid for state and local governments, hard hit by the pandemic, was highly anticipated by both red and blue states.
It became apparent very quickly, in March 2020, when state and local governments issued shelter-in-place orders and closed businesses, that public treasuries would be hit with a financial calamity the size and strength of which had never been experienced.
Budgets that were proceeding toward approval were thrown into disarray and revenue forecasts were deemed impossible to achieve.
To grapple with these crises, local governments drew down reserves, laid off and furloughed workers, and tapped into COVID-related grants to try to avoid dramatic diminution of core public services.
To fully appreciate the impact of the crisis on local government systems it is worth reflecting upon scenes from year one of the pandemic:
- The county hospital in Chicago treated COVID patients in hallways and positioned refrigerated trailers in parking lots to store the overflow number of bodies.
- San Antonio’s public transit system found that majorities of its passengers were people who did not own cars, had incomes below the poverty line, jobs that did not allow them to work from home, and for whom accessible transit routes were urgent.
- Austin had to equip school buses with Wi-Fi and station them in parking lots, enabling families in underserved neighborhoods to drive their children to where they could access remote instruction.
- Colleges and universities found that the inability to disinfect HVAC systems in academic buildings and residence halls required suspension of normal classes.
- Local and state government revenues fell off a cliff: Detroit suffered a $100 million shortfall in 2020; in Seattle, revenue was off $220 million just a few months into the crisis, in June 2020; and the list goes on.
- In Philadelphia, diagnosis and treatment of illnesses via telemedicine, which could have reduced the concentration of sick people in public hospitals, could not be offered to neighborhoods isolated by the digital divide.
The scenes described above have another common factor, and that is public facilities and services that could not support public safety, health measures, and economic sustenance.
The pandemic only exacerbated the magnitude of the deficiencies in our infrastructure and the after-action reports will note the need to upgrade public facilities and programs. Some of that look-back will be criticism using cliches, such as “fighting the last war” or “closing the barn after the horse is gone.” But the recommendations to upgrade public facilities and services will be right on point in two ways.
First, planning for many public facilities had not anticipated a mega-event such as a pandemic, meaning they were not up to the scale, severity, and urgency of the coronavirus. The lack of public primary care facilities is an example. Public health expert Tom Frieden has pointed out the pandemic underscored the importance of primary care, which the U.S. has not invested in anywhere near sufficiently.
He makes the case for upgrading and expanding obsolete and overcrowded public health facilities and adding new ones in underserved areas.
The second way the case for upgrading public facilities is correct is that we will confront new viruses, as infectious as COVID-19, but perhaps more deadly and more severe for young adults and children. The threat also exists of the global spread of Ebola-like diseases and virulent strains of bacteria. Advance preparations are warranted, and that means having in place the physical facilities and systems.
Upgrading also means incorporating the latest technologies in the next generation of facilities, for example, embedding state-of-the-art information technology in hospitals and clinics to use telemedicine, reducing the density of very-sick people. It is true that we do not want to fight the last war, but we must do our very best to prepare for the interwoven complexities of the next one.
This planning obviously has implications for public budgets, financing, and debt, and the American Rescue Plan does not fully anticipate these future funding needs. Further, facilities planning will require favorable tax policies, sophisticated capital programing, bond financing, and pioneering public-private partnerships.
The lessons of the pandemic will necessitate critical public investments going forward, including new decentralized public hospitals and clinics; expanded routes and safety measures in public transit systems; massive coverage of broadband and 5G communications to support public education, university instruction, and telemedicine; new disinfectant capabilities of HVAC systems; food banks and reserve nutritional supplies for emergencies; and renovations of convention centers and public assembly spaces.
One often overlooked diminution of state and local government’s ability to effectively manage its debt levels and portfolios is the inability to advance refund its debt on a tax-exempt basis.
This occurred as a result of the 2017 tax law and caught many municipalities by surprise. Revisiting this provision and providing other taxable bond scenarios, such as was provided with Build America Bonds, would be tools local governments could use to better attack the growing deficit of infrastructure investment.
A cohesive national, bipartisan infrastructure plan will also serve as a foundation to begin addressing this impending infrastructure crisis.
During the pandemic, a wise caution was added to a normally complimentary sentiment: “If you have to rise to the occasion, you are already late.” Many public leaders and systems rose to the occasion but if our national, state, and local governments haven’t absorbed the imperatives of COVID-19, then we already are late in dealing with the next crisis.
Suzanne Shank is President, CEO and equity owner of Siebert Williams Shank & Co., LLC. Henry Cisneros is Vice Chairman of the Board of Directors and equity owner.
