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Facing an urgent financial crisis amid the COVID-19 pandemic, and states nationwide are eyeing dramatic reductions to their workforces, threatening critical public-sector employees and first responders at a time when many Americans may need their local governments’ help the most, the Washington Post reported. Even as President Trump and top Republicans contend that only big-spending, liberal-leaning states are to blame for their mounting budget woes, a Washington Post review found that the economic havoc wrought by the coronavirus is far more widespread — saddling Democratic and Republican mayors and governors alike with souring finances and major revenue gaps. Some local governments have already started laying off or furloughing thousands of their workers, and the numbers are likely to grow markedly in the absence of federal aid. Among municipalities, the new budget cuts could be profound: Between 300,000 and 1 million public-sector workers could soon be out of a job or sent home without pay, according to a new estimate from the National League of Cities. The steep reductions in staffing levels could affect education, sanitation, safety and health, local leaders warn, potentially leaving critical public services in utter disarray.

The Federal Reserve said yesterday that it plans to purchase short-term debt from a wider array of cash-strapped cities and counties, responding to concerns that some large U.S. municipalities including Baltimore and Detroit might have struggled to take advantage of its new $500 billion fund, the Washington Post reported. Now, cities with a population of 250,000 and counties with at least 500,000 residents may sell their municipal bonds directly to the central banking system, according to the Fed, which initially had set the bar so high that only 10 cities and 15 counties would have been eligible to sell their debt directly. Under the new threshold, more than 80 cities and 120 counties now qualify, amounting to a major expansion of a $500 billion facility that state and local leaders see as critical as they brace for multibillion-dollar budget shortfalls in the wake of the coronavirus pandemic. It could help push down interest rates, ease borrowing and help local governments raise revenue, perhaps sparing them from debilitating cuts to local programs or their own workforces.

BofA Global Research said on Friday that allowing U.S. states to file for bankruptcy is not the way to deal with deep financial problems the governments are facing from the COVID-19 economic disaster, and would knock down the municipal bond market, Reuters reported. In a research report BofA said the $3.8 trillion muni market where states, cities, schools and other issuers sell debt would “certainly sell off” if the idea garnered support. U.S. Senate Majority Leader Mitch McConnell (R-Ky.) on Wednesday brought up state bankruptcy as a preferred alternative to sending more federal money to the governments to plug their budget holes and potentially pay for pensions. President Donald Trump on Thursday said his administration would look at the idea. Several Democratic governors slammed the notion as irresponsible. Municipal market analysts said the move would face big political and constitutional hurdles and was unlikely to gain traction. “It will be highly disruptive to the municipal bond market broadly and will result in significantly higher borrowing rates at a time when those costs are least absorbable,” the BofA report said. It added states would not likely opt for bankruptcy for fear of hurting their market access and that most municipal bankruptcies have resulted in a better treatment for pensions than bondholders. Currently, only cities and other local governments can use chapter 9 municipal bankruptcy to restructure their debt if allowed by their states. Puerto Rico, a U.S. commonwealth, commenced a form of municipal bankruptcy in 2017 after the U.S. Congress authorized it.

Senate Majority Leader Mitch McConnell (R-Ky.) said yesterday that he favors allowing states struggling with high public employee pension costs amid the burdens of the pandemic response to declare bankruptcy rather than giving them a federal bailout, Bloomberg News reported. “I would certainly be in favor of allowing states to use the bankruptcy route,” he said yesterday. “It’s saved some cities, and there’s no good reason for it not to be available.” The host cited California, Illinois and Connecticut as states that had given too much to public employee unions, and McConnell said that he was reluctant to take on more debt for any rescue. “You raised yourself the important issue of what states have done, many of them have done to themselves with their pension programs,” he said. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.” McConnell’s remarks drew a biting response from state and local officials. New Jersey Governor Phil Murphy (D) said that he was stunned by McConnell’s comments, which he called “completely and utterly irresponsible.” Without cash to states, Murphy said, governors will be forced to “gut the living daylights out of every state of America,” slashing budgets and eliminating the services people need. New York Mayor Bill de Blasio (D) tweeted that McConnell “wants police officers to lose their jobs. He wants firefighters to go broke. He wants hospitals to close and sick people thrown out on the street.” McConnell’s statements also set up a conflict with House Speaker Nancy Pelosi, who said yesterday that a “major package” of aid for state and local government will be in the next stimulus legislation considered by Congress. McConnell may also find himself in conflict with President Donald Trump. The president said on Tuesday after meeting with New York Governor Andrew Cuomo that states will need assistance. “And I think most Republicans agree too, and Democrats,” Trump said. “And that’s part of phase four.”

Major metropolises including Austin, Baltimore, Boston and Detroit may struggle to access a $500 billion emergency lending program meant to shore up local governments’ cash-starved budgets under rules that limit participation only to cities with 1 million or more residents, the Washington Post reported. The program, administered by the Federal Reserve in coordination with the Treasury Department, seeks to buy short-term debt from cities, which should push down interest rates and help local leaders borrow at a time when they are facing a severe cash crunch as a result of the coronavirus pandemic. Under the rules of the program, though, only 10 cities and 15 counties are large enough to be able to sell directly to the Fed, according to 2018 census figures, which the Fed cites in its public guidance. That would include New York City, Los Angeles, Chicago, Houston, Phoenix, Philadelphia, San Antonio, San Diego, Dallas and San Jose. Counties, meanwhile, must have at least 2 million people to participate, a list that includes four counties in California, three in Texas, two in New York and one in Florida, Illinois and Washington. The local governments can still try to take advantage of the Federal Reserve’s $500 billion aid facility through their individual states. But the sheer fact they face such hurdles in the midst of an economic crisis drew sharp criticism from Democratic lawmakers. In a letter to Fed Chair Jerome H. Powell, sent Friday, Sens. Chris Van Hollen (Md.), Elizabeth Warren (Mass.) and five other party leaders called on the government to rethink the program, saying it threatens to imperil “hundreds of communities nationwide.” Lawmakers added that Congress never intended such restrictions when it adopted the $2 trillion aid package that President Trump signed into law last month. The CARES Act appropriates funds for the program targeting municipal bonds.

The toll of the coronavirus on air transportation is well known: It’s emptied airports and pushed carriers to bankruptcy. Mass transit employs almost as many people as air transport in the U.S., according to the Bureau of Labor Statistics — and it’s also in a perilous state, Bloomberg Businessweek reported. While the airlines’ catastrophe followed a decade of record profits, transit ridership in the U.S. since 2014 had already been declining, a result of cheap gas, the emergence of ride-hailing, and decaying infrastructure. Now experts predict that U.S. rail and bus systems may never fully recover from the pandemic. That could present new obstacles to millions of low-income commuters and set cities on a course toward heavier congestion and failed climate goals. As shelter-in-place orders and business closures have kept millions of workers at home, the most-used transit systems are carrying 70 percent fewer riders than usual, according to the American Public Transportation Association. Those riders left include workers in essential industries — nurses, janitors, grocery and pharmacy clerks, and others that state and local governments deem pandemic-critical. About 2.8 million of these use public transit, making up 36 percent of all riders, according to an analysis of 2018 U.S. Census Bureau data by TransitCenter, a think tank.

More than 2,100 U.S. cities are anticipating major budget shortfalls this year and many are planning to slash programs and cut staff in response, according to a new survey of local officials released today, illustrating the widespread financial havoc threatened by the coronavirus pandemic, the Washington Post reported. The bleak outlook — shared by local governments representing roughly 93 million people nationwide — led some top mayors and other leaders to call for greater federal aid to protect cities now forced to choose between balancing their cash-strapped ledgers and sustaining the public services that residents need most. The National League of Cities joined with the U.S. Conference of Mayors to conduct the early inquiry into the economic effects of the novel coronavirus, finding that many local governments are bracing for sharp declines in tax revenue as businesses shutter, workers lose their jobs in record numbers and tourism grinds to a halt. Nearly 9 in 10 cities surveyed — from smaller hubs with populations of fewer than 50,000 to the largest metropolitan areas in the country — signaled they expect a revenue shortfall. Among them, more than 1,100 cities are preparing to scale back their public services, the survey found. Almost 600 cities predicted they may have to lay off some government workers amid the crunch. And local leaders in 1,000 cities said the reductions probably would affect their local police departments and other public safety agencies.

The City of Vancouver is at risk of going bankrupt, says Mayor Kennedy Stewart, citing a recent poll showing more than half of property owners are not expecting to pay full property taxes this year as COVID-19 financial woes take hold, the Vancouver Sun reported. Stewart said that his earlier claim that the city would lose up to $189 million in revenue and fee shortfalls in 2020 could be $325 million short of the mark. The city has already laid off 1,500 workers. “If 25 percent of homeowners do end up defaulting on their property taxes, we could shed up to an additional $325 million in revenues,” Stewart said. “Losing more than half-a-billion dollars in operating funds in 2020 would devastate the city’s financial position, forcing us to liquify assets and exhaust every reserve fund we have — just to avoid insolvency.” Property taxes make up the bulk of the city’s revenues at $874 million in 2019.