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Argonne developed the State Government Revenue Vulnerability Index (SGRVI) and Local Government Vulnerability Index (LGRVI) to help identify state and local governments, respectively, whose revenues are particularly vulnerable to the impacts of COVID-19 and other economic downturns.
What are the State Government Revenue Vulnerability Index (SGRVI) and Local Government Revenue Vulnerability Index (LGRVI)?
Disruptive events, including pandemics and other disasters, can have lasting impacts on national and local economies. This has been made clear by the economic downturn caused by COVID-19. Reduced economic activity also impacts state, local, tribal and territorial government budgets which limit their ability to respond to the needs of community members.
Argonne developed the State Government Revenue Vulnerability Index (SGRVI) and Local Government Vulnerability Index (LGRVI) to help identify state and local governments, respectively, whose revenues are particularly vulnerable to the impacts of COVID-19 and other economic downturns. These indices focus on estimated losses in fees, taxes, and other sources of revenue resulting from the COVID-19 pandemic, protective actions that affected economic activity, and resulting job losses.
What Do the SGRVI and LGRVI Measure?
The SGRVI and LGRVI measure the vulnerability of government revenues by estimating monthly changes relative to a January 2020 baseline. Revenues included in both indices include: taxes on products and sales, transportation and housing revenues, individual income taxes, severance taxes and royalties, and property taxes. Local government revenues also include a local revenue from state revenue sharing component. In addition, the main index for the LGRVI for county-level governments includes revenue estimates for sub-county government units, including municipalities, school districts, and special districts. This revenue data is aggregated to produce the indices. A more complete description of the methodology, including how estimates for each revenue source were produced, is available here [LINK].
Why Are the SGRVI and LGRVI Important?
These indices provide up-to-date estimates of which state and local governments are likely to be experiencing the greatest revenue losses, which can in turn help identify state and local governments most in need of assistance. In conjunction with a suite of other data, the SGRVI and LGRVI can also be used to provide a more complete picture of the socioeconomic impacts of the pandemic.
How Can I Use the SGRVI and LGRVI?
The indices may be used as a first step in identifying state and local government financial vulnerabilities by indicating which governments rely on revenue streams that are likely to have been most heavily impacted by the pandemic. The state scores produced by the SGRVI and LGRVI reflect the estimated impacts on revenues collected by each state relative to January 2020. A government with an SGRVI or LGRVI score of 96% for a given month, for example, is expected to collect 96% as much revenue from economic activity that occurred in that month as it collected from January 2020 activity. When interpreting index scores for both the SGRVI and LGRVI, lower scores reflect higher revenue vulnerability, and higher scores reflect lower revenue vulnerability.
Both indices provide important context for understanding the combined and relative impacts of the vulnerability of various revenue sources on state and local economies. There are several limitations, however, that should be considered when using these indices. First and foremost, as noted above, the SGRVI and LGRVI are estimates of revenue impacts based on proxies, rather than on government revenue reporting. The indices do not account for differences between states and local governments in policy and behavioral responses, timing of revenue collection, fund balances or debt levels, or changes in government expenditures. It is also important to keep in mind that both indices are designed to measure impacts relative to January 2020, rather than to what economic activity would have been in the absence of COVID-19. In other words, if economic activity would have increased after January 2020 in the absence of COVID-19, the index may underestimate the impacts of the pandemic.
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Argonne National Laboratory’s work is supported by the U.S. Department of Homeland Security, Federal Emergency Management Agency, via interagency agreement through U.S. Department of Energy contract DE-AC02-06CH11357. FEMA does not endorse any nongovernment entities, organizations, or services.