Finance Policy Proposal and Local Administration

Local Administration and Finance Policy Proposal

The Corona Virus pandemic resulted in an economic recession that caused the U.S. real gross domestic product (GDP) to decline by 3.5%. This led to the loss of employment for more than 20 million workers, initially prompting the federal government to initiate interventions that would cushion county, district, and local governments (OECD, 2022). Initially, the intervention adopted was a domestic cash-transfer program involving a $1200 monthly stipend disbursement. However, the economic stimulation as the covid-19 regulation protocols have been withdrawn will necessitate more strategic financial policies at all levels of government (Aharon et al., 2021). The government’s responsibility is to create the environment and structures that prevent economic damage. Cash transfers were intended to inject money through consumers’ expenditure into the economy. Still, as the economic environment changes, the government needs localized financial policies to stimulate new business and growth of existing ones.

The pandemic led to the first full-year economic contractions since the 2008 financial crisis. Personal consumption fell by 3.9%, the main source of government revenue and is the lowest since the 1932 recession. The outbreak’s impact differs across regions depending on the ability of employees to work remotely, with areas that rely largely on small and medium-sized enterprises being affected disproportionately (Barbero, de Lucio, and Rodríguez-Crespo, 2021). The regions where the high mortality rates were also disproportionately affected, especially densely populated regions being the most affected in the first wave of outbreaks. In contrast, the rural and less densely populated were affected the most in the second wave of the infection. Consequently, the economic impact of the pandemic in different regions varies, necessitating ideal interventions that are ideal to these set of conditions in economic recovery planning. The government interventions at different levels vary spending on their mandates and the unique challenges and opportunities they encounter.

The federal government policies are often driven to meet the changes in international trade and create capacity locally for economic growth. Consequently, the fiscal policies adopted by the federal government are should be geared towards economic stimulation at an international level and securing the national economy. For example, securing the supply chain channels despite the need for the economic lockdown was critical to ensure the health, food, and other essential households and industrial products are accessible locally and internationally (OECD, 2022). Such measures not only ensure the economic activities were not stiffed completely by lockdown measures but support the government’s measures to limit the spread of the virus by making such products accessible through online distribution channels such as Amazon shopping and delivery services (Aharon et al., 2021). However, long-term measures towards the economic recovery in 2022 and beyond should be founded on financial policies and strategic intent for financial management by the county, district, and local authorities. This would mandate the Federal Government to relinquish some of its administrative powers to determine the local budgets to develop policies that are ideal to the regional conditions.

Initially, the disbursement of cash in monthly stipends was executed under the Budget & Accounting Act of 1921 that requires the president to an annual budget request for the federal government to Congress and create the office of management and Budget (OMB) for federal agencies. The motherly stipends were authorized under the 1974 Congressional Budget & Impoundment Control Act. Under this bill, the Coronavirus Response and Relief Supplemental Appropriations Act of 2021 (CRRSA), March 2020, was passed to cushion the economic impacts of the pandemic. The bill’s core areas of focus were direct payments to taxpayers, economic support for small businesses, fiscal assistance to large companies and governments, and federal aid to hospitals and healthcare providers (OECD, 2022). The government raised these funds through local and international borrowing to meet the deficiencies in the available resources and the budgeted expenditure. However, these measures limited the strategic use of policies at the county, district, and local governments level to meet the ideal challenges that affect the local communities.

Under the Coronavirus State Fiscal Recovery Funds (CSFRF), district and local governments were awarded $169 billion to replace lost public-sector revenue, public health, stabilization of families and businesses, and pay for essential workers. Implementing this strategy will foster the solution of challenges at the different tiers of government depending on the ore economic activities and the impact of the pandemic on their main sources of revenue (Barbero, de Lucio, and Rodríguez-Crespo, 2021). The expenditure can be applied to strategies that aim to stimulate economic growth, such as injecting capital into the banking system, engaging local communities through public-private partnership structures, and attracting foreign direct investments. These measures can be implemented simultaneously, but the challenges ideal to a region determine the priorities of government expenditure and recovery policies.

In areas that rely on small and medium-sized enterprises for economic growth, the local governments are inclined to adopt regulations that foster economic growth and make capital accessible. The dissemination of funds allocated by the government under the CSFRF is limited to its identified purposes. Consequently, the strategies adopted by local governments should be aligned to these functions (Nicola et al., 2020). Notably, the disbursement and the localization of strategies can be accomplished by formulating government-sponsored and joint powers agreement pools. Establishment of local government investment pools (LGIPs) that would be set up through intergovernmental agreements (joint powers) or authorized under state statutes and sponsored by the state or local governments (OECD, 2022). Such agreements allow state and local governments to work collectively through a board of trustees that is made up of public officials, custodial services, participant record keepers, independent auditors, and legal services. These measures accountability in lending or investment activities of LGIPs.