New Survey Finds Federal Aid to Cities Enabling Pandemic Recovery, Contributing to More Positive Economic Outlook

Federal aid cited by 81% of city finance officers as having the most positive impact on FY2021 budgets, according to NLC’s annual City Fiscal Conditions survey.

WASHINGTON, D.C. – The National League of Cities (NLC) today released its annual City Fiscal Conditions survey, which finds that federal assistance has been instrumental in helping communities large and small begin to recover from the economic shock of the COVID-19 pandemic. Federal aid was cited by 81% of city finance officers as having the most positive impact on FY2021 budgets, contributing to a more positive economic outlook. Still, infrastructure needs continue to weigh heavily on municipal budgets. 

“Cities are leading the way in coming up with equitable ways to recover and rebuild from the COVID-19 pandemic,” said Clarence Anthony, Chief Executive Officer and Executive Director of NLC. “Municipal finances are on the mend and the economic outlook is improving as a result of direct, flexible federal relief, such as those from investments in the American Rescue Plan. The data is clear – the nation’s economic recovery begins on the Main Streets of our cities, towns and villages.” 

When asked about top, immediate priorities for ARPA funds, two-thirds of cities have or will replace lost revenue, and 54% will use funds to directly support residents and small businesses. Other spending priorities, from enhancing public safety to addressing homelessness, will also allow cities to make lasting investments in their communities.

The City of San Diego, for example, will dedicate 100% of its ARPA funds to revenue replacement, which will support expanded homelessness services, among other programs. In Boulder, CO, city officials plan to provide assistance with utility bills, rental assistance and assistance to small businesses, among other priorities. Likewise, Winston-Salem, NC, plans to provide assistance to small businesses and non-profits impacted by the pandemic. Many cities indicated that their communities are still planning how they will use ARPA funds for long-term, transformational investments.

Key Findings: By the Numbers

• 81% of city finance officers cite federal aid as having the most positive impact on FY2021 budgets. 
• Two-thirds of cities surveyed anticipate using American Rescue Plan Act (ARPA) funds to replace lost revenue. 
• 54% of cities plan to use ARPA funds to directly support households, small businesses, non-profits and impacted industries.  
• Half of all city finance officers report that infrastructure is the factor most hindering their ability to balance FY2021 budgets.

The ARPA funds, and the CARES Act funding that came before it, helped pump the brakes on an economic freefall. Cities saw general fund revenues decline about one percent in FY2020, with cities anticipating a further year-over-year decline of two percent for FY2021, according to the survey. Although significant, these losses pale in comparison to the losses cities would have sustained without federal intervention. 

While federal aid has helped stave off economic disaster, infrastructure needs continue to weigh heavily on municipal finances. Half of all city finance officers report that infrastructure is the factor most hindering their ability to balance FY2021 budgets. Many cities were forced to pause infrastructure projects during the COVID-19 pandemic due to budgetary constraints, and cities continue to face challenges in funding infrastructure maintenance as well as new projects. 

“We look forward to Congress finalizing the Infrastructure Investment and Jobs Act so that municipalities and the federal government can work together to build and strengthen the infrastructure that keeps Americans moving,” Anthony said. 

The NLC City Fiscal Conditions survey is a national survey of finance officers in U.S. cities conducted in June and July of this year. Surveys were emailed to city finance officers from cities with populations greater than 10,000. In total, the 2021 data were drawn from 443 cities of different sizes, representing all regions of the country. 

To read the full City Fiscal Conditions 2021 survey, click here.