Report: Absent Federal Aid to State and Local Govts, 5.3M More Jobs Will Be Lost By 2021

If federal policymakers do nothing to address the massive and unprecedented declines in state and local revenues as a result of the COVID-19 pandemic, the United States could end 2021 with 5.3 million fewer jobs, according to a report released today by the Economic Policy Institute.

According to the analysis, absent federal aid, Maryland would lose 97,000 jobs by the end of 2021. If Congress passes only $500 billion in relief, then the shortfall will be smaller, but will still exceed 67,000 jobs by the end of 2021. If Congress passes only $300 billion, then the shortfall will be 47,000.

State and local governments have less room than the federal government to increase spending in response to downturns. Most states and local governments, Maryland included, have balanced budget requirements, meaning that declines in tax revenues, if not offset by increases in federal funding, must be met by spending cuts or tax and fee increases.

Recent estimates indicate that state and local governments that state and local governments will face a shortfall approaching $1 trillion between now and the end of 2021. According to the Economic Policy Institute’s analysis, if this $1 trillion shortfall is not filled in by the end of 2021, then state and local government spending would be roughly $430 billion lower at the end of 2020 and $570 billion lower at the end of 2021.


As previously reported on Conduit Street, Maryland’s Bureau of Revenue Estimates last month outlined two scenarios for the impact of COVID-19’s on state revenues, both of which assume a vaccine exists by the fall of 2021 and there is no second wave of the virus that causes an economic shutdown.

The more optimistic scenario (S2) is based upon Congress providing assistance to state and local governments, among other less severe economic assumptions. In that scenario, Maryland would face a $925 million shortfall for fiscal 2020, a $2.1 billion gap for fiscal 2021, and a $2.6 billion hole for fiscal 2022.

In the more dire scenario (S4), which assumes no additional federal aid for state and local governments, Maryland would see a $1.1 billion reduction in fiscal 2020, a $2.6 billion deficit in fiscal 2022, and a nearly $4 billion decline in fiscal 2022.

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Courtesy of Comptroller of Maryland

Read the full report from the Economic Policy Institute for more information.

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