With this pandemic upending everything, the states and the cities are set to get hit with revenue shortfall which will take a long time to recover. Already the states seeing a hit to their revenues are asking Congress to reimburse them for losses incurred due to this pandemic. Already some of the states are planning to lay off essential workers if the Federal aid does not come their way. This will include Police, Fire fighters, sanitation workers and other retrenchment in government offices that help the poor and needy citizens. Because of the lock down due to the pandemic and the huge job losses in the private sector, the resulting effect of their not spending money is hurting government tax revenues which are critical and essential to providing services to the citizens of their states and cities. I will give you one example of mine. I live in New Jersey and work in New York, I used to go every day to New York, although I used to get coffee and donuts only and sometimes on Fridays lunch but my smallest act was supporting somebody’s livelihood and thus contributing to the economy of New York. My working from home for the last 3 months has not helped New York or even New Jersey much. I don’t drive much since I stay home five times a week working from home. I don’t take the subway and I don’t take coffee and donuts too and so it all adds up. This is just a simple example of one individual who is not even a resident of New York may be hurting the economy of New York.
One can just calculate how much the residents of New York who are under a lock down are hurting the economy of New York, while the salaries of essential workers are not stopped. The Tax revenues of almost all states are in dire straits right now. And this is on top of all the unfunded pension liabilities that keep on piling up. And at this time, nobody would want to increase taxes as common citizens are hurting without jobs and even talk about increasing taxes is a big taboo. So the only way to avoid mass layoffs and avoid cutting off essential services to vulnerable citizens is either to cut the barest minimum services or wait for the federal help to arrive which even if it arrives will not be enough to offset all the losses that have occurred or will be occurring in the near future. States and cities better brace themselves for a bumpy ride of economic ruin and decay for a few years to come.