State and Local Government Finance in the Current Crisis: Time for
Emergency Federal Relief?
David E. Wildasin Martin School of Public Policy and Department of Economics University of Kentucky Lexington, KY 40506-0027 USA
A review of recent fiscal history can help to understand
the mechanisms by which subnational governments adapt their tax,
expenditure, and debt policies to an ever- changing economic
environment, and on the role of fiscal assistance from higher-level
governments in this process. In principle, proposed Federal assistance
to states and localities may provide useful macroeconomic stimulus and
financial support, but past experience, in the US and elsewhere,
highlights the pitfalls in achieving rapid delivery of substantial
assistance while simultaneously targeting scarce fiscal resources to
the most urgent needs and preserving incentives for prudent financial
management by states and localities.