State finances are key – laundry list – infrastructure, education, economic efficiency, and international competitiveness.
Jonathan Masters 21, Deputy Managing Editor with CFR.org and MA in social theory from New School; and Anshu Siripurapu, Writer with CFR.org and Georgetown Law student, 3/19/21, Council on Foreign Relations, “How COVID-19 Is Harming State and City Budgets,” https://www.cfr.org/backgrounder/how-covid-19-harming-state-and-city-budgets //sj
The U.S. national economy is composed of a vast collection of local and regional economies, where state and local policies play a significant role. Collectively, state and local governments outspend Washington on direct goods and services, employ more workers than the domestic manufacturing sector, and are responsible for about 15 percent of national GDP.
States and cities supply nearly 80 percent of the $441 billion spent nationally on transportation and water infrastructure, according to the Congressional Budget Office’s most recent data. These investments help fuel the economy directly by creating jobs in sectors such as construction, experts say, and are also essential for improving long-term economic efficiency and international competitiveness. (For example, less congestion lowers business costs.) The 2019 Global Competitiveness Report from the World Economic Forum (WEF) ranked the United States second overall in economic competitiveness, but thirteenth in quality of infrastructure. The American Society of Civil Engineers gave the United States a D+ in its 2017 Infrastructure Report Card—the same grade it gave in 2013.
State and local governments contribute more than 90 percent of the money spent nationally on K–12 education, as well as provide substantial financing for the public university system, which graduates the majority of U.S. college students. While education has typically been the largest budget category of total state spending, Medicaid’s share has been growing over the past decade.
At a more basic level, states and cities are where life is lived and economic decisions are made. While budget austerity at the federal level can seem removed to many families and businesses, the effects of cutbacks in their home states and localities are tangible. Cuts to police and fire departments, for instance, mean some neighborhoods are less safe. Fewer teachers and more students per classroom erode the quality of education, making U.S. workers less competitive in the long run. Crumbling roads and bridges discourage businesses from investing.