The American political conversation is, more often than not, a debate about federal power. We fixate on Washington—its budgets, its dysfunction, its rare moments of action. But the reality of daily governance, of the policies that shape our schools, our roads, our housing, our safety, is overwhelmingly local. And as the federal government pulls back—whether through budget cuts, rising debt burdens, or a shift in political priorities—local governments must step forward.
This is not a hypothetical concern. In recent years, the federal government has steadily withdrawn from many of the programs that buttress local communities. Emergency pandemic aid, which briefly masked deep structural weaknesses, is gone. Infrastructure and public service funding is increasingly left to states and municipalities. Social safety net programs face renewed pressure. The message is clear: the era of expansive federal support is over, at least for now.
And yet, local governments remain largely unprepared for this reality. Too many cities and counties are dependent on unpredictable streams of state and federal funding. Many lack the financial tools, legal authority, or political will to raise revenues in a way that is sustainable and equitable. The result is a slow erosion of public trust—communities expecting services that governments cannot deliver.
The solution isn’t austerity. It’s capacity-building. Local governments need to expand their ability to generate and manage revenue. They need more sophisticated financial strategies, broader taxation authority, and deeper engagement with residents about the cost of public goods. Without these, they will simply be administering decline.
Take taxation. Property taxes remain the dominant revenue source for most localities, but they are politically fraught and often regressive. Many jurisdictions rely heavily on sales taxes, which disproportionately burden lower-income households. Cities need a more diversified tax base, one that taps into wealthier residents, capital flows, and corporate profits. Some have begun experimenting with municipal income taxes, congestion pricing, and public banking, but these remain the exception rather than the rule. Expanding progressive tax structures—such as luxury real estate taxes or fees on high-frequency trading—could provide new revenue streams without overburdening the working class.
Then there’s financial management. Many local governments operate with outdated budgeting systems, insufficient reserves, and rigid spending rules. Smart fiscal policy isn’t just about raising revenue—it’s about managing it well. Participatory budgeting, long-term investment strategies, and data-driven decision-making should be standard practice, not novel experiments. Cities that have successfully implemented multi-year financial planning and performance-based budgeting show greater resilience during economic downturns. Investing in financial literacy training for public officials could further enhance these efforts.
Infrastructure funding is another critical challenge. While the federal government still contributes to major projects, local governments are already responsible for approximately 70% of all publicly owned infrastructure in the United States. Cities will be increasingly forced to rely on municipal bonds, public-private partnerships, and targeted user fees to fill the gap. Leveraging impact investments and green bonds could create new financing avenues for sustainable development projects. In addition, cities must explore land value capture mechanisms—ensuring that the public benefits from the rising property values driven by public investments, rather than letting wealth accumulate solely in private hands.
Finally, the politics of local finance must change. There is a reluctance among elected officials to ask residents to pay for the services they demand. But the alternative—perpetual budget crises, crumbling infrastructure, and an inability to respond to emergencies—is far worse. Leaders need to make the case that well-funded local government isn’t just necessary; it’s the foundation of a functioning society. Clear, transparent communication about how tax dollars are spent can foster public buy-in. Some cities have adopted online dashboards that allow residents to track spending and outcomes in real time, an approach that should be more widely embraced.
As the federal government increasingly shifts financial burdens downward, cities and counties must take control of their fiscal destinies. This means innovation, hard choices, and, above all, a commitment to building the local capacity that strong communities require. If local governments fail to act now, they will find themselves not just underfunded but unable to meet the fundamental needs of the people they serve. The stakes are high, but the tools are available—what remains is the political will to use them.
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