Policy memo: Leiser and Ivacko on "State and local governments as partners in our national recovery"

January 25, 2021

As the Biden administration embarks on its first hundred days, experts from the Gerald R. Ford School of Public Policy have produced a series of policy briefs on key issues. Download the PDF of this brief or read the web-formatted version below.

By Stephanie Leiser, lecturer in public policy, and Tom Ivacko, executive director of the Center for Local, State, and Urban Policy (CLOSUP)


Partnering with and investing in state and local governments presents opportunities for the new administration to make progress on key issues, and helps strengthen our democracy’s foundation at its grassroots, where evidence shows it still has relative strength and vibrancy today.  

While Washington has been mired in ideological gridlock, state and local governments have been forced to take the lead in addressing many of the country’s most pressing issues–the COVID-19 pandemic, Black Lives Matter and police reform, systemic racism and inequality, deteriorating infrastructure, broadband access, and worsening natural disasters related to climate change. While trust in the federal government is at historic lows, it remains relatively high at the state and especially the local levels, facilitating innovation and experimentation in the “laboratories of democracy.”

But state and local governments are in a precarious position. State and local government employment is down about seven percent (nearly 1.4 million jobs) since the pandemic started and Moody’s reports a negative outlook for state and local governments in the next year. Before the pandemic began, more than half of local governments in Michigan said they still had not fully financially recovered from the Great Recession, and 30 percent said they were already suffering from medium to high levels of fiscal stress.

If austerity and retrenchment take hold, the slow recovery of state and local governments will likely be a drag on the entire economy as it was after the Great Recession. And instead of tackling big issues, state and local politics will devolve into the turf wars of budget cutbacks, likely exacerbating existing inequities between communities with more and fewer resources, and undercutting the foundations of our democratic system. With the right support from the federal government, however, state and local governments can lead the way in advancing policies that promote broad-based economic recovery.

Economic challenges

  • Evidence shows that the slow recovery of state and local governments was a drag on the recovery from the Great Recession. State and local governments make up about nine percent of GDP and 13 percent of total employment. We cannot afford to ignore such a large portion of the economy.
  • Restrictions on state and local budgets mean that the fewest resources are available just when they are needed most. While the human, community, and economic needs for state and local services are counter-cyclical, balanced budget requirements mean that without federal aid, state and local governments have no choice but to cut services when revenues fall.
  • Inequity and inequality are mirrored in local government fiscal health. Systemic inequities are contributing to growing inequality in personal income and wealth, and the same is true for local government fiscal health. Despite the sustained period of national economic growth leading into the pandemic, those benefits are spread unevenly and many communities have been left behind.

Political opportunities

  • Trust in government remains high at the local level. Our research contributes to the broader consensus that despite dysfunction and gridlock at the federal level, confidence remains high in local government. Nearly three quarters of U.S. adults say they have a "great deal" or a "fair amount" of trust in their local government. In addition, local government leaders themselves believe that our democracy is still functioning well at the local level, even as it has descended into crisis at the national level.
  • State and local governments have become leaders for change. From delivering front line responses to the COVID-19 pandemic and worsening natural disasters, to tackling police reform, confronting systemic racism and inequality in housing and education, struggling to efficiently steward deteriorating infrastructure assets, ensuring broadband Internet access for all, and more, state and local issues have been front and center, and many of them have bipartisan support.


  • Support state and local governments with federal aid. Cuts to state and local services disproportionately hurt the most vulnerable, but without federal aid, many state and local governments will have few choices but to make painful reductions.
  • Encourage and learn from policy innovation and experimentation at the local level. Federal government agencies can work to study and foster the dissemination of best practices and innovative ideas among state and local governments. They can also provide incentives to promote regional collaboration on issues of shared interest among groups of state and local governments.  
  • Look to state and local governments as partners rather than adversaries. Our research has also uncovered breakdowns and strained relations between the local, state, and federal governments. The federal government can help strengthen our democracy by reviving mechanisms like the Advisory Commission on Intergovernmental Relations to promote ideas to help levels of government work in concert rather than at odds.  

Download this memo