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Were Major Cities and Counties of the Fourth District Prepared to Meet the Economic Downturn of 2020?

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While almost no one anticipated the pandemic-induced shutdown of economic activity experienced this year, local government officials know that the business cycle will sooner or later pull down tax revenues. In this District Data Brief, Cleveland Fed researchers Stephan Whitaker and Cornelius Johnson examine how prepared 25 cities and 25 counties in the Cleveland Fed’s Fourth District were for the COVID-19 crisis.

Looking at the most recent data available for a sample of the District’s largest cities and counties, the researchers find that major local governments in the Fourth District were holding fund balances that were similar to or greater than their reserves in 2007, the year the Great Recession began. Experiencing the Great Recession gave jurisdictions a better idea of how much savings they needed to weather an economic downturn.

Among the cities analyzed, Columbus, Cleveland, Dayton, and Dublin, Ohio, and Erie, Pennsylvania, all increased their unallocated funds as a percent of expenditures by more than 12 percentage points. Among counties, Montgomery, Butler, Warren, and Greene Counties in Ohio and Erie County, Pennsylvania, all increased their savings substantially, carrying balances greater than 50 percent of their annual expenditures in 2018 or 2019.

“Some of the cities that had to slash their spending in 2009 and 2010 appear to have learned from that experience and have built up a deeper financial cushion since then,” say the researchers. “Likewise, some of the cities and counties that have lower balances now are those that had sufficient reserves in 2007 and were not forced to make deep cuts during the Great Recession.”

Read More: Were Fourth District Local Governments Ready for a Recession? How the Great Recession Influenced How Much They Save

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