Federal Assistance and Local Actions: Have California Municipalities Maintained Their Fiscal Health During the COVID-19 Pandemic?

Rui Sun and Janey Qian Wang

Municipal Finance Journal, 2023, vol. 44, issue 2, 31 - 54

Abstract: The COVID-19 pandemic has created unprecedented challenges for public health and local economies. Despite the initial revenue shocks, with the federal stimulus funds of 2020 and 2021 and increases in local property tax and other taxes, most California cities are projected to recover from the pandemic-related revenue losses. Based on data from 482 California cities, this study examines the impact of COVID-19 on municipal fiscal health. Results reveal that federal financial assistance has a supplemental revenue impact on municipalities, and the distribution of federal funding helps improve income inequality among municipalities. The study also finds that the distribution of federal funding has spatial correlations and that local actions play a crucial role in maintaining fiscal health, especially during a time of crisis. This study contributes to the public finance literature regarding fiscal federalism. It also has practical implications for local public managers and policymakers in maintaining their cities’ fiscal health.

Date: 2023
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