Not so bad, but ...
If you take a look at some municipal governments’ fiscal fortunes today, things don’t look too bad. Certainly, the outlook is better than in the spring, when many officials feared that the coronavirus situation was going to take a terrible toll on their fiscal fortunes.
The City of Defiance’s situation is a good example. While the city’s income tax receipts will be down about 4% this year — which is a better figure than what was thought earlier — the general fund balance is going to grow, perhaps by more than $1 million over last year.
There are a number of reasons for this, but the main one is the city has received funding from state and federal governments to compensate for the impact of the coronavirus situation. However, in the bigger picture this is something of a mirage.
Yes, it can be argued that state and federal governments — who are responsible for the response that has impacted the economy — should be compensating local governments for the fiscal damage. But where is this money coming from?
Few are thinking about the answer, perhaps because it’s unpleasant. But the federal government basically has created this money out of thin air, and it’s helped balloon the national debt to $27.2 trillion. Does anyone have any idea how our nation, or future generations, are going to deal with that over the long term?