(Illustration by Shutterstock/iam2mai)
You can almost hear the sighs of relief. Only a few months ago, state and local officials across the United States were preparing for the worst. In some cases, the worst was already happening.
As the human and economic impact of the pandemic worsened, massive budget deficits and cuts in essential services seemed inevitable. Many municipalities and private employers had already started furloughs and layoffs. Cities all over the country were seeing record numbers of small business closures, and projecting staggering revenue and budget deficits. Some were starting to see evidence of widening disparities in access to education among children. And state and local leaders knew from hard experience that already-marginalized communities were bearing the brunt of it all.
But now, state and local governments are receiving the largest infusion of direct federal funding in US history: $350 billion dollars to rebuild local economies and systems across the country over the next three years. This American Rescue Plan funding is more than twice the relief funding provided by the federal government during the Great Recession, and a Pew analysis shows that it equals between 5 percent and 20 percent of states’ total spending in the 2020 fiscal year.
America’s state and local leaders might understandably be tempted to play it safe and use this one-time funding to plug budget holes and get back to where they were in late 2019. But stopping there would be a huge mistake. Before leaders start signing contracts, they should take a step back and make sure that the systems and services they are investing in actually help the people and communities hardest hit by the pandemic.
Smart investment must start with an honest assessment of what is and what is not working. The last 16 months have removed whatever shred of doubt remained: America’s public systems drive inequitable outcomes. Black and Brown people, and people living in communities with high levels of poverty, were already the least well served by these systems before the pandemic. COVID-19 has exacerbated the problem.
Health disparities are especially stark. The Centers for Disease Control and Prevention estimate that Black and Brown people have died from COVID-19 at far higher rates than other groups (when adjusted for age).
Educational inequity is also deeply concerning. Recent analysis by McKinsey researchers shows that Black and Hispanic students have been far less likely than white students to have received online instruction during pandemic school closures—widening existing gaps in access to quality education.
And the impact on small, minority-owned business is well documented: A Congressional report by the House Committee on Small Business showed that Black business ownership declined by more than 40 percent during the pandemic—more than any other group, in large part because of chronic inequities such as less access to capital.
These all exact a terrible human cost, and the broader inequality they produce is a serious threat to economic growth and social stability. The Organization for Economic Cooperation and Development (OECD), a collective of the world’s wealthiest countries, found that rising inequality in the United States from 1990 to 2010 reduced GDP by around 5 percent, primarily by undermining education opportunities for disadvantaged children, in turn impeding their development, decreasing their future earnings, and limiting their participation in the economy. Since the OECD released its analysis in 2014, economic inequality in the United States has only gotten worse.
Just as important, leaders also need to take a close look at what is working. Over the last five or six years, a culture shift has been underway as more and more municipal and state leaders have begun embracing an evidence-driven, resident-centered, equity-advancing approach to local government. A growing number of overlapping lessons are emerging from this work.
1. Trust in Data
Using data and evidence to improve services and deliver them more equitably, make smarter use of tax dollars, and build transparency and trust with residents is at the heart of this culture shift. As highlighted in a new landscape report from Monitor Institute by Deloitte and Bloomberg Philanthropies’ What Works Cities, state and local governments across the United States have been applying this approach to issues such as public safety, health, and human services, housing and homelessness, and workforce development. At the same time, they are aggressively investing in critical data infrastructure, and training staff to disaggregate data and use it to more clearly understand challenges and need. They are also using data to engage more transparently and directly with residents, making information more immediately available.
The report highlights the direct impact it is having in people’s lives—including improved services like reduced response time for emergency services. It also notes that cities that have invested in data infrastructure and data skills have been able to respond more quickly and effectively during the pandemic, including by creating data command centers and public information dashboards.
The city of Long Beach, California, for example, reacted quickly to the onset of the pandemic. In only a few weeks, it created a dedicated “data strike team,” as well as systems to help city officials locate COVID-19 hot spots and deploy rapid testing sites tied to neighborhood demographics, and online information portals to increase vaccination rates.
The city of Phoenix, Arizona, used disaggregated economic and demographic data to improve its public communication plans, including pinpointing where to play Spanish-language video messages in neighborhood grocery stores serving high concentrations of refugee and immigrant populations.
2. Remember Equal Is Not Necessarily Equitable
Many state and local leaders are beginning to recognize that distributing resources equally does not mean distributing resources equitably.
Consider education, often described as the great equalizer. Even when government funding for education is distributed equally among schools and districts of differing median incomes—which it often is not—some students start with fewer resources, including limited access to pre-school, less experienced teachers, and other disadvantages that students in better-off neighborhoods never face. To offset this foundational disparity, the city of Cambridge, Massachusetts, gives preference in pre-K program placements to children growing up in families that make less than the city’s median income.
Similarly, city fines and fees may look equity-neutral on their face, impacting city residents equally. A parking ticket is a parking ticket, wherever it is issued. But increases in fines and fees to raise revenue have a disproportionate financial impact on low-income families, making it harder for them to pay for basic needs like food, rent, transportation, or childcare. Equipped with evidence that its municipal fees and fines were in fact hurting people in poverty and communities of color, the city of Philadelphia shifted away from reliance on those revenues.
The city of Tulsa, Oklahoma, recognized that equal isn’t equitable when it comes to distributing affordable housing funds. When city leaders found that its policy of equally distributing funding across all neighborhoods regardless of need was disadvantageous to residents and communities in the greatest need, they shifted to a new data-driven approach that directs funding to neighborhoods with the highest poverty rates.
Community members participate in conversations about the city of Austin budget priorities. (Image courtesy of the city of Austin)
Using data to improve programs and recognizing that equal doesn’t always mean equitable are strong steps in the right direction. But some local governments are going further and explicitly budgeting for equity; they are creating new budgeting tools to assess the impact of budgeting on marginalized communities and to monitor progress against equity goals. In many places, advancing equity has become the baseline for all budget requests.
Over the last several years, Philadelphia has made this a centerpiece of its commitment to racial and economic equity. The city created a Budget Equity Committee that evaluates proposed changes in spending or revenue generation, based on the impact those changes will have on people of color and low-income residents. Proposals projected to have a negative effect cannot be included in the budget. City departments are required to consider the impact of their budgets on meeting equity goals, including contracting with more minority- and women-owned businesses.
The city of Austin, Texas, has also formally incorporated equity principles in its budgeting process. Its Equity Assessment Tool requires all city departments to examine their policies, procedures, human resources, and budgeting to determine their impact on racial and economic equity goals. Using this tool for its 2021 budget, the city increased its public health budget by $1.8 million, reflecting resident requests for more mental health and violence prevention programs, among other areas.
3. Be Willing to Start Over
Data and evidence are helping leaders identify which programs and investments are failing to produce equitable results for residents, but leaders must be willing to act on that information and rethink, restructure, and even replace broken systems.
That’s exactly what the Los Angeles County Board of Supervisors did in 2020 when it confronted the failure of its juvenile probation system to help minors improve their lives. Probation officers lacked youth development training. Too many young people lacked educational or vocational opportunities. And too many Black and Brown youths were stuck in vicious cycles of incarceration and probation.
In an unusual step, the board of supervisors formed a working group composed of youth leaders, community advocates, service providers, and other stakeholders to guide decision-making as it considered how best to reinvest $80 million in earmarked funding. The group’s recommendations were not window dressing: Their policy recommendations formed the basis for a proposal unanimously adopted to pass control of youth probation to a newly created Department of Youth Development grounded in healing, well-being, and racial equity.
4. Prioritize the Historically Excluded
Federal relief funding is not a renewable revenue stream, it’s a one-time pay-out. Leaders should not whittle it away on plugging less-consequential budget holes. Instead, they should use it to make inroads against inequities that state and local governments simply couldn’t afford before—and to prioritize funding for those who have not been well served, particularly over the last 16 months.
State and municipal governments could start by committing to invest federal relief dollars in more minority-owned and women-owned businesses. This is not only because these businesses have been hit disproportionately hard both by historic discrimination and the challenge of COVID-19. It is also because minority and women-owned small businesses are more likely to support their local communities—for example, by providing free delivery or special hours for the elderly during pandemic lockdowns.
Recognizing the important role these businesses can play in helping communities recover from crises, some cities are starting to change procurement and contracting policies and practices. After analyzing historic contracting data, for example, the city of Baton Rouge, Louisiana, found that it was spending only around 4 percent of contract dollars with minority and other socially and economically disadvantaged businesses (SEDBs), while the market could support a 21 percent investment. The city linked this finding to its ambitious transportation and infrastructure improvement program, prioritizing contracts with SEDBs and increasing their ability to bid on a greater portion of major projects, as well as shifting procurement systems that have systematically excluded those businesses.
Governments should also consider providing direct relief (cash assistance) to struggling families, a widely used strategy in international development that is starting to gain support in the United States. In 2019, the city of Stockton, California, piloted Stockton Economic Empowerment Demonstration (SEED), a monthly cash-transfer program for families in underserved communities. The results were impressive: Recipients used the transfers to pay for essentials like food, rent, utilities, and debt repayment, and to handle unexpected expenses like medical emergencies. Far from discouraging work, as some elected officials fear cash assistance will do, the program seems to have spurred employment: Participants secured full-time employment at twice the rate of nonparticipants. And as the pandemic began wreaking economic havoc, the cash assistance was a lifeline for struggling families. Dozens of other cities around the country are now testing direct funding programs. They’re also using federal relief funding for outreach to ensure all eligible families are aware of and can access the American Rescue Plan’s expanded federal Child Tax Credit.
5. Listen to Residents
While data can point the way to where local governments need to put more attention and resources, data alone can’t communicate the lived experience of residents; only residents can. A growing number of local governments are creating new channels for community engagement and resident participation in decision-making and policy development.
The city of Austin, Texas, will not consider budget proposals before equity commissions of local leaders and constituents review them. The city of Denver, Colorado, has been holding community town halls to solicit residents’ ideas for where and how to spend $700 million in COVID-19 recovery funding. And Los Angeles County’s earlier-cited decision to replace its broken juvenile probation system was deeply informed by the direct experience of young people actually involved in that system.
Shifting to an evidence-based, resident-centered, equity-advancing agenda is not charity, and it is certainly not socialism. It is a pragmatic approach designed to achieve greater results that change people’s lives—and in doing so, grow the economy, strengthen communities, and build resilience against future crises. It is also urgent. If we can’t do this now—when the pandemic has yet to pass, when the evidence of structural inequity is irrefutable, and when the money is available for ambitious plans—when exactly would we do it?
Perhaps for the first time ever, America’s state and local leaders have the money to do more than dream. It’s time to make history with these historic funds.
Read more stories by Michael Nutter & Simone Brody.