Local, county and state governments impacted by health crisis: The financial fallout of COVID-19

NORTH EAST — Just days before Republican Senator Mitch McConnell of Kentucky suggested states struggling financially due to the COVID-19 pandemic consider filing for bankruptcy last Wednesday, Dutchess County Executive Marc Molinaro was making the rounds on national TV talking about local communities needing support from the White House and Congress to deal with the economic fallout of the global health crisis.

More New Yorkers infected than previously believed

With more than 2,700 positive coronavirus cases in Dutchess County as of Monday, April 27, and roughly 282,000 cases confirmed through diagnostic testing in the state, New York has been the epicenter of the outbreak in the U.S. In fact, on Monday, Governor Andrew Cuomo updated an April 23 announcement, stating that data now shows 14.9% of New Yorkers — more than the nearly 3 million estimated on April 23 — have been infected with COVID-19. Cuomo added that more than 24.7% of New York City residents have also been infected. The results were gathered through a state-wide testing program that randomly checked for coronavirus antibodies among 7,500 supermarket customers. Antibody tests indicate whether someone may have immunity to a virus, like COVID-19, rather than testing for the virus itself. The governor acknowledged antibody testing accuracy in the U.S. is still unproven.

Counties pulling their weight

And while the states have been dealing with a lot during the pandemic, Molinaro said on C-SPAN on Monday, April 20, that it’s the counties that have the “major responsibility of that front line response: to monitor, track, test and ultimately help rebuild the economy.”

The county executive lost his own father, Anthony Molinaro, just 67 years old, to COVID-19 this month after the elder Molinaro spent two weeks critically ill in a Westchester County hospital.

“It’s a struggle,” said his son, adding county governments have a major role in responding to the pandemic. “My father would expect us to carry on, so we carry on… When somebody dies and loses their battle, we’re the ones contacting family and collecting data. It’s going to be county government on the front lines providing direct services.”

He added that Dutchess County is expecting a $40 to $50 million loss — roughly 50% — in sales tax revenue because of COVID-19 this year. 

“County employees are gratefully being paid… [often] doing jobs that are pandemic focused; all of that is critical,” Molinaro told his C-SPAN interviewer. “It’s critical for county government to be providing this service. We’re calling on Congress to find [funding for counties] within this legislation… to do the work they want us to do and that we want to do.”

$484 federal stimulus aid

The $484 billion federal COVID-19 relief package, which the Senate unanimously passed on the 21st and the House passed with a vote of 388-5 on the 23rd, did not give municipal governments the direct aid they sought. The president signed the legislation on Friday, April 24.

The federal aid was sorely needed after the small-business Paycheck Protection Program (PPP), which was a part of the $2 trillion economic stimulus package known as the CARES Act passed by Congress in late March, was quickly depleted and no longer capable of processing loans. 

Hundreds of billions of dollars went into the latest stimulus package, including $310 billion to restore the PPP, $75 billion to support hospitals and healthcare providers, $60 billion to go toward small business emergency loans and grants and $25 billion for a new COVID-19 testing program. The hope is that improved and increased testing will allow society to return to normal — lifting stay at home orders and opening closed businesses and schools — more quickly, once it’s deemed safe.

More local and state funding

But Cuomo, who has been championing the need for more state and local funding for weeks and had asked Congress to pump $500 billion into both levels of government, said that once again, the federal government has failed with its latest relief package. 

“They funded small businesses,” he said. “Great, good move. How about police? How about fire? How about teachers? How about schools?”

The governor has been very public in stating that if the federal government failed to allocate enough money, New York would be in trouble. On Monday, April 20, before the bill was passed, he was characteristically blunt.

“If they exclude state government again, our state forecast,  we can’t spend what we don’t have,” said Cuomo. “We would be cutting schools by 20%, local government by 20% and hospitals by 20%, and this is the worst time to do this.”

He has even said that in a worst case scenario, cuts to education could be as extreme as 50%. And there is reason to be grim. On Friday, Cuomo confirmed New York revenues will suffer a $13.3 billion loss because of COVID-19. During the next four years, the state’s revenues are expected to decline by an astounding $61 billion.

“The federal government said from day one, ‘Don’t worry, we will provide funding to the states,’” he said last week. “But I’m worried… I have one purpose: I fight for New York, that is my job. I have no side jobs, no other places to go, that’s all I do, and I’m telling you, New Yorkers need funding for this budget because we can’t do it otherwise.”

Molinaro has echoed Cuomo’s complaints about federal funding being inadequate during the pandemic. He noted last week that the burden county governments willingly carry, including administering public health departments; testing sites; public hospitals; quarantining, monitoring and tracking those who are ill; and contacting the families of those who have died, comes at a cost. 

“I think it’s important for Americans to know that county governments are really responsible for the first line of response,” Molinaro said.

Sen. Chuck Schumer (D-NY) acknowledged the shortfalls in the latest deal, and said state and local governments may have to wait for another week or two before Congress agrees on yet another economic aid package to provide them relief.

“Many counties are running on fumes,” responded Molinaro. “Another two weeks to scrimp and hold things together… We’re the ones helping small business owners, trying to connect the unemployed with food stamp assistance… Local governments are the first line of defense and we’re providing that service as ably and responsibly as we can… and we need help from the federal government to accomplish that.”

Towns and villages dealing

Municipal governments have paid the price of the COVID-19 health crisis, too. According to North East town Supervisor Chris Kennan, who said the biggest local challenge is financial, New York “was looking at an extremely challenging budget situation even before the coronavirus happened, and this has made it that much worse. Towns and counties in New York state will need help, and our taxpayers are not in any position to shoulder that burden.” 

Kennan added that the state has been “very hard hit” by the pandemic.

“Over 30% of all cases in America are in New York state, which has caused massive dislocation and required major spending on the part of the state,” said the town supervisor. “But the state has not been getting 30% of the federal aid.

“It remains to be seen how much of it we feel locally,” he added. “Some of our local businesses have been able to access a Paycheck Protection Program loan, and the latest aid package added more funds to that. If that program can keep some of our local businesses going until we are able to re-open the economy, it will be a good thing.”

Meanwhile, Cuomo said on Sunday, April 26, he may soon reopen portions of the state, starting upstate, including construction and manufacturing businesses that have so far gotten through the coronavirus crisis relatively unscathed. The governor said such businesses could perhaps reopen after May 15, which is when his New York on PAUSE Executive Order to close New York’s non-essential businesses and schools is set to expire.

The governor, like other state leaders, has said that reopening the economy will be done in phases.