Blogs Economics Covid-19 federal assistance to state and local governments and its consequences Gavin Newsom, the governor of California and an optimist for the presidency, recently reached an agreement with state legislators on one more check to mail to families in the state (Luna 2022). The families will receive up to $ 1,050 in cash from the state government, a strategy that will cost about $ 10 billion. This follows two previous rounds of so-called Golden State Stimulus payments to California residents
All of this constitutes quite a change of tone from May 2020, when Newsom proposed significant cost reductions in response to the recession caused by the Covid-19 epidemic (Governor Gavin Newsom 2020’s office). What happened?
In the first months of the epidemic, analysts and policymakers alike expressed significant concern about the impact of the initial recession and widespread lockdown on state and local budgets (Bartik 2020, McNichol et al. 2020). Since state and local governments in the United States are generally bound by balanced-budget requirements, revenue cuts can cause sudden disruption of service provision and reduce employment for state and local government employees (Clemens and Miran 2012, Shoag et al. 2019). To av