State and Local Governments Face
Unprecedented Economic Losses after
Recent Recession
Following most recessions in the United States over
the past five decades, state and local governments have helped to lift the overall economy through increases in consumption, investment, public sector employment, and property tax revenue. As a recent study from the Urban-Brookings Tax Policy Center reveals, however, the impact of the 2007-2009 recession on state and local governments has been markedly different, with never before seen losses seen in all four of these indicators and in overall state and local government contributions to the national GDP. Benjamin Harris and Yuri Shadunsky examined trends in state and local government activity from 1970 to the
present, including six periods of economic recession in the United States. While each of these recessions varied in length and severity, during the years immediately following each recession, changes in state and local government spending, employment, and revenue were notably similar until the most recent decline.
Harris and Shadunsky compared change rates for
these measures over a three-year period from the trough
of economic contraction for each of the six U.S. recessions
since 1970. Their findings show that following the
first five recessions, state and local government consumption
and investment rose by one to 16 percent; over the
three years following the most recent recession, by contrast,
consumption and investment fell four percent – an
unprecedented post-recession decline. Similarly, in four
of six recessions, state and local government employment
increased by two to eight percent post-recession. Only
the recoveries beginning in 1980 and 2009 saw declining
state and local government employment, and of these,
2009 showed the largest loss of 3.5 percent. Property tax
revenue trends revealed yet another anomaly after the
most recent recession. The study shows that revenues from
property tax increased after each of the first five recessions,
at an average gain of about 10 percent, yet in sharp
contrast such revenues contracted by one percent after the
2007-2009 recession.
In addition to the most recent recession being the
longest in duration of the six that they examined, the
authors suggest that an additional key factor lies behind
the stark differences that mark the most recent recovery
period. The 2007-2009 recession centered on a housing
crisis that toppled home values across the United States
and shrunk property tax revenues, a crucial financial
stream for state and local governments.
Though Harris and Shadunsky’s findings indicate a
negative effect of the recent recession on state and local
governments that is atypical compared to other recessions
since 1970, the authors note that such effects may
become the norm following future recessions. They point
to limits on state borrowing, unpredictable revenues at
the state and local level, and growing resistance among
some governments to increase taxes as factors that could
lead to similar negative impacts on these governments
and, by extension, the national economy following future
downturns.
Harris, Benjamin H. and Yuri Shadunsky, "State and Local
Governments in Economic Recoveries: This Recovery is
Different," Urban-Brookings Tax Policy Center, 2013.
Urban Families Seek Affordable Homes
in Rural Areas
In a growing trend that reverses traditional rural to urban
migrations of the past, American families seeking lower-
cost housing options and safer neighborhoods are
relocating from major urban centers to neighboring rural
communities. According to a recent study, high housing
costs, a lack of available housing units, and persistent
crime problems in some city neighborhoods are among
the most significant motivating factors for the families that
decide to move to rural areas nearby in pursuit of a safe
and affordable alternative. Yet these families often face
different challenges in their new rural environments.
Sherri Lawson Clark’s study, part of a larger twophase
research effort, includes an in-depth examination
of the experiences of 18 low-income families moving
from urban to rural areas in Pennsylvania. Through interviews
and observations over an eight-month period,
Lawson Clark and her colleagues found that study participants
moved to rural locations primarily to find better
and less expensive housing, and secondarily to live in a
safer neighborhood. While many of the study participants
noted that they were able to find more affordable housing
in their new rural communities, other barriers arose there,
including difficulty securing employment, transportation,
and child care, and difficulties around racial tolerance.
Most of the families in the study who moved from urban
to rural communities are African American, while the
rural areas they moved into are largely white. Some families
also had difficulty finding their initial housing in the
rural area due to perceived or actual instances of racial
intolerance. Study participants reported difficulty adjusting
to rural cultural norms and other unexpected differences,
as the majority of them had never before lived
outside an urban environment.
Yet the most significant challenge, according to Lawson
Clark, is competition for a dwindling number of jobs in
rural areas hard hit by industrial decline. The three rural
counties included in Lawson Clark’s study were already
home to a relatively poor population, and though all of the
study participants who moved from the city were foremost
seeking housing rather than jobs with their migration, they
found that there were few opportunities for work when they
arrived. A lack of reliable transportation and accessible
child care in the rural communities contributed to the arriving
families’ challenges in finding suitable employment.
This study suggests that while lower-income urban
families are moving away from expensive urban areas to
find affordable homes, few employment opportunities are
available when they arrive, and the rural communities
they join are already struggling with declining investment
and infrastructure. Lawson Clark concludes that the trends
shown in the study support a significant need in urban
communities for more affordable housing in safer neighborhood
environments, which would allow these families
to remain in familiar surroundings near job opportunities
and amenities rather than pushing them into struggling
nearby rural communities.
For practitioners, they suggest that increased collaboration between the fields of urban planning and public health could help to mitigate health disparities.
Clark, Sherri Lawson, "In Search of Housing: Urban
Families in Rural Contexts," Rural Sociology, Vol. 77, No.
1, March 2012, 110-134.
The views expressed are not necessarily
those of the Federal Reserve Bank of San Francisco or the
Federal Reserve System. Material herein may be reprinted
or abstracted provided is
credited. Please provide our Community Development Department
with a copy of any publication in which material is reprinted.