KBRA Releases Research – Waning COVID-Era Federal Dollars: Are State and Local Governments at Risk?

KBRA releases research that examines how federal stimulus payments under three programs, in response to the COVID-19 disruption, have been utilized by state and local governments and the relation to credit risk as these payments subside.

The measures resulted in a substantial infusion of funds for states, counties, cities, transit systems, and airports, which offset potential operating deficits and tempered credit quality impacts, while allowing time for economic recovery. While the primary focus was on replacement of lost revenue, federal funds have been used in varied ways, including expenditures not related to the pandemic. As funding has ebbed, COVID-era governmental spending decisions may act to support or challenge future financial stability, and the permanency of remote-working arrangements may necessitate ongoing adaptation to maintain fiscal stability.

Key Takeaways

• Use of federal stimulus payments varies significantly.
• Grant monies were a financial windfall for many governments.
• Entities that established new programs with grant funds may face a fiscal cliff if dedicated replacement funding is not identified.
• Farebox-reliant transit systems may face difficult decisions if long-term ridership rebounds are modest.

Click here to view the report.

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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