Initial findings conclude that 2020 is only the beginning of a significant municipal financial crisis, with an even more dire situation looming in 2021.
By the end of 2021, 112 of the 534 municipal governments in the 10-county region in southwestern Pennsylvania may not have sufficient revenues to continue operations. The figures below come from a team from the University of Pittsburgh Graduate School of Public and International Affair's Center for Metropolitan Studies (CMS), led by its director Dr. David Miller and Dr. George Dougherty. The research team also includes the Pennsylvania Economy League of Greater Pittsburgh (PELGP) and Congress of Neighboring Communities (CONNECT) which is housed within CMS.
Models that assume a relatively short (low) economic shutdown (4 percent overall revenue loss in 2020 and 2021), a longer (medium) shutdown (11 percent loss in 2020 and 2021) and a prolonged (high impact) shutdown (16 percent loss in 2020 and 2021) were developed based on 2014-2018 audited reports filed by 525 of the 534 municipalities with the Pennsylvania Department of Community and Economic Development (DCED). Researchers estimated potential revenue losses under different recovery scenarios. Based on these calculations, municipalities in the 10-county region can expect revenue losses over the next two years of approximately $226 million under the low impact recovery scenario; $564 million in the medium impact scenario; and $970 million in the high impact scenario.
The research team found there is a fair amount of reserve financial capacity in the region’s local governments. Most municipalities have sufficient reserves to weather the financial loss under a relatively short economic shutdown. However, as the recovery timeline slows, more municipalities will exhaust and exceed their reserves, a situation defined by DCED as “fiscal distress.” Approximately 47 municipalities will deplete their reserves under the longer (medium) shutdown scenario over the next two years. That number would grow to approximately 112 in a prolonged shutdown.
“With the potential of upwards of 20 percent of our region’s municipalities facing financial distress, we know major collaborative efforts will need to be mounted to address these extraordinary and potentially catastrophic financial circumstances heightened by the COVID-19 pandemic. We need to mobilize all partners immediately to begin coordinating and planning for the recovery of our region’s local governments,” said Miller.
“There will not be an equitable economic jumpstart without the municipalities, counties and Commonwealth working together with the region’s civic sector. Our strategy must change and encourage this work to be ultimately driven by and for elected and appointed officials leading our municipal governments into this new era,” concluded CONNECT Executive Director, Lydia Morin.