As the recession lengthens, are public agencies going to be able to continue to fund infrastructure projects?

One of the few economic bright spots since the onset of the COVID-19 pandemic has been the continued infrastructure construction activity by state and local governments. This work was determined to be an “essential service” and in the intervening months, they have proved to be.

As the recession lengthens, however, are public agencies going to be able to continue to fund infrastructure projects?

To answer that question, the ACEC Research Institute hosted the “Funding in the New Normal” roundtable on July 16 with Rosemarie Andolino, former chair of MAG USA and CEO of International Development, Manchester Airport Group; Anirban Basu, chair and CEO, Sage Policy Group; Jeff Davis, senior fellow, Eno Center for Transportation; and David Zipper, visiting fellow, Harvard Kennedy School’s Taubman Center for State and Local Government

State and local government revenues have been hit very hard by the recession. Unlike the federal government, state governments must balance their budgets each year. Revenue shortfalls, no matter how steep, must be matched by spending cuts. As a result, in 2021 state and local governments will have to delay or cancel both current and future infrastructure projects unless the federal government provides new funding.

Public transit agencies also face a crippling shortfall of revenue. Most transit agencies rely on farebox revenue to pay their bills and farebox revenues have fallen dramatically due to the pandemic. And given the need for social distancing, they will likely begin to increase in the foreseeable future. The panelists said that if the federal government does not step in to bridge the funding gap, the sector will suffer layoffs, severe service reductions, and bankruptcies.

The panelists agreed that the uncertainty around both the federal government’s next round of stimulus and a broader infrastructure bill has cast a pall over public projects at all levels of government. With no consensus in Congress regarding providing additional funds to state and local governments and no certainty that they will pass a major infrastructure program, state and local governments are planning for the worst.

The economic impact of the pandemic on the public infrastructure markets has been severe. In the short term, all eyes are on the federal government to keep them above water, Once federal stimulus efforts end, however, the state and local governments will likely need three to five years to return to pre-pandemic project levels.

Click here to view the roundtable.