What happens when high-earners leave cities, taking their spending power with them?

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It’s Saturday, Aug. 12, and we’d like to welcome you to the weekly State and Local Roundup. There’s plenty to keep tabs on, with New York’s first cybersecurity strategy, another state preemption battle, social media’s role in youth homicides and an anti-pickleball ordinance. But first, we’ll start with the urban doom loop. 

“A shell of what it was.” “Eerily quiet.” “Deserted.” “Vacant.”

Residents of major cities have likely heard some of these phrases used to describe downtowns during the pandemic when most people were working from home. Pictures from cities across the country showed empty sidewalks, carless roadways and closed up storefronts.  

Amid stay-at-home orders, the country’s largest cities experienced a mass exodus of people in the first two years of the COVID-19 outbreak. Many opted to trade in high-rent apartments for more affordable options outside the city. As residents left, they took their taxable income with them.  

Between 2020 and 2021, taxable income in large urban counties fell by more than $68 billion due to net migration, according to a new analysis released Tuesday of IRS data by the Economic Innovation Group. 

Many of the country’s “superstar” cities sustained staggering losses. San Francisco’s tax base shrunk 20% between 2020 and 2021, representing a loss of about $8 billion. Manhattan, for instance, lost more than $16 billion in federally taxable income through net migration, which is equal to about 13% of remaining residents' incomes. Boston, Washington, D.C., and Los Angeles were the other hardest-hit communities.

A shrinking tax base is not the only problem for local governments. Declining populations in large urban counties can deter companies from setting up shop, said report author Connor O’Brien.

“If retailers start to think that this [exodus] is maybe a harbinger of longer term trends, maybe that means a longer term decline in the retail or services footprints in core urban counties,” he said.

That decline could have cascading  tax implications for localities beyond loss of sales tax. Less demand for housing in particular areas could also lower property values, resulting in reduced property tax revenues, he added. 

Large urban counties had already been seeing decreases in taxable income. In the early 2010s, major cities were the first to recover in the years after the Great Recession. But by 2016, city dwellers started slowly moving to suburban and rural areas, resulting in a roughly 0.5% loss in total taxable income in large urban counties annually, O’Brien said. The pandemic significantly accelerated that leakage, spiking to a 2% loss. 

But all that money has to go somewhere, and the lucky winners have been rural counties, where taxable income increased by 1.5%—the largest increase among all county types. Many of those communities are mountain towns and other tourism-centered communities. While it’s too soon to tell if new residents plan to stick around long term, the one-time boon could still have powerful, lasting effects, according to O’Brien.

“The inflow of wealth could plant the seeds of new growth in some places that really need investment, that really need entrepreneurship and that had been losing high-skilled workers for a long time,” he said. 

The shift represents a change in the American economic landscape. Coastal cities have long been the financial engines of the country, but counties throughout the Sun Belt and Mountain West are growing quickly and attracting a specific demographic: high-earning households. 

Take Maricopa County, Arizona, where the average income of inbound residents was $92,000 in 2021, while residents moving out earned less than $77,000. Similarly, Lee County, Florida’s new residents earned about $123,000 annually, while those leaving the area earned less than $75,000. 

Meanwhile, in large urban counties, the average income of departing residents was $10,000 more than incoming residents. But that figure increases significantly in some cities. In San Francisco, the average household leaving the city earned $105,000 more than the average household moving in. 

“The ultimate drivers of these shifts, from strong job growth to new opportunities opened up to families by remote work, are at this stage still hard to untangle,” the report concluded. “Nevertheless, if these shifts hold or continue, they will have serious impacts on the country’s economic geography, leaving some regions flush with new resources and others struggling to fill eroded tax bases.”

Keep reading as there’s more news to use below, and make sure to come back here for the week’s highlights. If you don’t already and would prefer to get it in your inbox, you can subscribe to this newsletter here. We’ll see you next week.

News to Use

Trends, Common Challenges, Cool Ideas, FYIs, and Notable Events

• New York state debuts first cybersecurity strategy. Gov. Kathy Hochul announced on Wednesday the state’s first cybersecurity strategy. The plan focuses on five areas, including upgrading state networks to support modern security technology such as multifactor authentication. It also calls for the state to work with county governments and federal agencies on cybercrime investigations and information sharing. In addition, the state plans to focus on developing its cybersecurity workforce and educating New York residents and companies about cybersecurity. Several states have cybersecurity strategies in place, including Iowa, Michigan and West Virginia, and many other security programs are folded into states’ wider IT plans. Few approach the scale and resources dedicated to New York’s plan.


• U.S. Supreme Court temporarily revives regulation of “ghost guns.” The Supreme Court on Tuesday left in place the Biden administration’s regulation of “ghost guns”—kits that can be bought online and assembled into untraceable homemade firearms. The rule is a key part of President Joe Biden’s broader effort to address gun violence. The court’s brief order gave no reasons, which is typical when the justices act on emergency applications. The order was provisional, letting the regulation stand while a challenge moves forward in the courts. The vote was 5 to 4, with Chief Justice John Roberts and Justice Amy Coney Barrett joining the court’s three liberal members—Justices Sonia Sotomayor, Elena Kagan and Ketanji Brown Jackson—to form a majority.


• L.A. workers walk off job for 24 hours. Thousands of Los Angeles city workers hit the picket lines Tuesday for a massive one-day strike after union leaders accused the city of unfair labor practices, which Mayor Karen Bass and other officials denied. Service Employees International Union Local 721, which represents 7,000 city workers, began the strike at 12:01 a.m.—the first major walkout by Los Angeles city government workers in decades. The strike brought lifeguards, traffic officers, airport custodians, sanitation workers and others to picket lines at the airport, City Hall and other locations.


• Oregon SOS: Senators who walked out can’t run next year. Ten Republican and Independent senators who participated in a six-week walkout this spring won’t be allowed to run for reelection, Secretary of State LaVonne Griffin-Valade announced Tuesday. Griffin-Valade wrote that she views voter-approved Measure 113 as disqualifying Oregon lawmakers who received 10 or more unexcused absences during the 2023 legislative session from running for reelection in 2024. Senate Republican Leader Tim Knopp said in a statement that he and other lawmakers who boycotted the Senate will challenge Griffin-Valade’s determination in court. At dispute is what the full text says and what voters intended.


• Fargo sues North Dakota. Fargo is suing the state of North Dakota over a new law that bans zoning ordinances related to guns and ammunition, continuing a clash over local gun control. While the state’s biggest city has an ordinance that bans people from selling guns and ammunition out of their homes, the Republican-controlled legislature passed a law this year that limits cities and counties from regulating guns and ammunition. The law, which took effect Tuesday, also voids existing, related ordinances. The city’s lawsuit says the “stakes are much higher” and gets at whether the legislature can “strip away” Fargo’s home rule powers. Fargo voters approved a home rule charter in 1970 that gave the city commission certain powers, including the power to zone public and private property.


• Are social media apps fueling homicides among young Americans? As shooting rates among the young remain stratospheric, evidence suggests social media is serving as an accelerant to violence. Taunts that once could be forgotten now live on before large audiences, prompting people to take action. Much has been said about the possible links between heavy social media use and mental health problems and suicide among teenagers. Now violence prevention workers, reports ProPublica, are taking that concern to the logical next step. If social media plays a role in the rising tendency of young people to harm themselves, could it also be playing a role when they harm others?


• The newest form of school discipline: online learning. School districts nationwide are now placing students in online learning as a response to misbehavior, in a process referred to in certain circles as “virtualization.” Lawyers and advocates across the country say that the practice of forcing a student out of the physical school building and into online learning has emerged as a troubling—and largely hidden—legacy of the pandemic’s shift to virtual learning. Critics charge that these punishments can deprive students and their families of due process rights. Students risk getting stuck in deficient online programs for weeks or even months without the support they need and falling behind in their academics. Sometimes, there is no system in place for tracking how many students are being punished this way or how many days of in-person classroom learning they are forced to miss.


• Ohio’s Issue 1 goes down to defeat. Ohio voters have defeated Issue 1, according to the Associated Press on Tuesday night. The no vote rejects a proposed constitutional change that would have made it harder to pass future amendments to the Ohio Constitution. It also means an amendment that could enshrine abortion rights into the state's constitution will still only need to pass by a 50% plus one margin when it comes up for a vote this November. A higher than expected number of Ohio's registered voters cast ballots in this special August election that was set by supermajority Republican state lawmakers who oppose abortion.


• Michigan eyes vehicle-miles traveled charge. State officials are exploring whether to replace gas taxes with “usage charges” as the auto industry’s shift to electric vehicles is expected to cut into tax revenues for road repairs. With fuel taxes projected to decline by hundreds of millions of dollars in coming years, the $82 billion budget Gov. Gretchen Whitmer signed last week supports ongoing efforts to explore one possible alternative: charging motorists for each mile driven, rather than each gallon of gas consumed. Michigan plans to spend more than $5 million—including $2.6 million from a federal grant authorized in the budget—to survey 20,000 Michiganders this fall and study the potential impact of a road usage charge system.


• Universal free school meals expands to another state. Massachusetts has joined a small but growing number of states adopting universal free school meals programs. Spending for the program was included in an overdue $55.98 billion state budget signed into law by Gov. Maura Healey on Wednesday. About $172 million in permanent funding is included in the budget to provide meals for all public school students in kindergarten through high school. Massachusetts joins at least seven other states that have stepped in to provide school meals to all students since a federal program ended last year.


• Is Texas’ bullet train back again? A proposed bullet train between Houston and Dallas that once was written off by critics is now again under consideration, officials said. Amtrak and the railroad company Texas Central announced Wednesday they are conducting the planning and analysis work associated with the proposed Dallas-Houston high-speed rail project to determine its viability. Critics considered the proposition of a bullet train dead last year when Texas Central Railway's CEO Carlos Aguilar stepped down. One of the reported issues critics had with the proposed train was whether the company could acquire property via eminent domain, but a July 8, 2022 statement from the Texas Supreme Court affirmed its right to acquire the necessary property.

Picture of the Week

As an increasing number of pickleball players claim the flat hard surface of tennis courts for their games—laying down tape to mark lines and rolling portable nets into place—tennis aficionados are having a harder time finding available courts to play their venerable pastime. It’s gotten so bad in Glendale, Colorado, that the city is pursuing an ordinance that makes it illegal to “mark the surface of the (tennis) court with any type of temporary or permanent marks or lines.” The city council approved the measure last week on a first reading and will cast a final vote next month. High-definition cameras will be used to monitor courts, and violators could receive a misdemeanor citation. It appears to be the first ordinance of its kind in Colorado—or perhaps the nation. The tennis courts (above) at Infinity Park are closed as crews work to refurbish them and build four separate pickleball courts elsewhere so that each gets its own dedicated space. (Photo by RJ Sangosti/MediaNews Group/The Denver Post via Getty Images)

Government in Numbers

29, 12, 10, 9, 7, 15, 2

According to data presented at a federal hearing on control over New York’s Rikers Island jails, just two days ago staffers used force against detainees 29 times. There were 12 fights among detainees and 10 incidents in which detainees harmed themselves or said they wished to. There were nine assaults on staff and seven fires. Jail workers recovered cocaine, fentanyl, marijuana, Prozac, Ambien, 15 sharp objects and two iPhones. To alleviate a crisis in which a normal day can include numbers like those, the federal judge will allow federal prosecutors and lawyers for detainees to argue that an outside authority should take over the jails. The hearing highlighted the daily chaos that reigns in the jails despite repeated assertions by New York City Mayor Eric Adams and his allies that conditions are improving. On Thursday, Judge Laura Taylor Swain set a schedule for a series of legal arguments that may shape the future of the city’s jail system.

ICYMI

How one state is heading off the costs of an aging population
Washington recently launched a long-term care insurance program that looks to support aging in place for a burgeoning senior population.
BY KAITLYN LEVINSON

Unless states act soon, the ‘AI rich’ will ‘only get richer’
The industry is currently concentrated in only a handful of places in the U.S. States can change that.
BY KERY MURAKAMI

Cyber grant program gets a big funding boost
Nearly $375 million, or double the amount of money as last year, has been allocated to a federal initiative looking to help state and local governments address cybersecurity risks.
BY CHRIS TEALE

Housing-first interventions, not policing, key to ending homelessness
New data shows that government assistance during the pandemic dramatically reduced homelessness. So why are cities and states increasingly turning to criminalization to address the issue?
BY MOLLY BOLAN

Food assistance for new moms and toddlers projected to fall short
The number of low-income women signing up for the federal Women, Infants and Children program is sharply increasing. But funding levels don't look likely to change.
BY KERY MURAKAMI

Early detection helps states control invasive species before it’s too late
By leveraging innovative detection and monitoring tools, state and local land managers can get ahead of the environmental and fiscal consequences of the aggressive spread of non-native plants.
BY KAITLYN LEVINSON

More states look to boost kids’ social media literacy
Florida now mandates that it be taught in public schools. Other states may follow in a bid to deal with the youth mental health crisis.
BY CHRIS TEALE 

Emergency rental assistance programs do more than provide cash assistance
Beyond covering rent, the federal funding laid the groundwork for improved partnerships with courts and data integration that will help communities continue providing support.
BY MOLLY BOLAN