WSJ: States Lament The Staggering Loss Of Tax Revenues As A Result Of Lockdowns (Long)

quote:

---

U.S. States Face Biggest Cash Crisis Since the Great Depression

---

quote:

---

Connecticut acted fast. Social distancing, lockdowns and testing...But when Comptroller Kevin Lembo opened an email from his budget director on April 15, it was clear the state’s quick action to contain the pandemic hadn’t insulated its finances.

---

quote:

---

“We hit the brakes so quickly on the economy that we went through the windshield,” his deputy wrote.

---

quote:

---

Connecticut is projecting a total revenue decline of $8.4 billion through the 2024 budget year—more than twice the rainy day fund built up over the past three years.

---

quote:

---

Nationwide, the U.S. state budget shortfall from 2020 through 2022 could amount to about $434 billion, according to data from Moody’s Analytics, the economic analysis arm of Moody’s Corp.

---

quote:

---

That’s greater than the 2019 K-12 education budget for every state combined, or more than twice the amount spent that year on state roads and other transportation infrastructure, according to the National Association of State Budget Officers.

---

quote:

---

Deficits have already prompted tax hikes and cuts to education, corrections and parks. State workers are being laid off and are taking pay cuts, and the retirement benefits for police, firefighters, teachers and other government workers are under more pressure.

---

quote:

---

Even after rainy day funds are used, Moody’s Analytics projects 46 states coming up short, with Nevada, Louisiana and Florida having the greatest gaps as a percentage of their 2019 budgets.

---

quote:

---

New Jersey is expecting a more than $5 billion revenue decline for the 2021 budget year, a 13% drop from the state’s pre-Covid projection. Already one of the most indebted states in the nation, New Jersey authorized a contested plan to borrow up to $10 billion; raised taxes on people earning between $1 million and $5 million; and is making another billion in cuts to help plug the gap.

---

quote:

---

Tourism has dropped in Florida, Nevada and Hawaii, and casino closures hurt Rhode Island, New York and Illinois. Hawaii, for example, is expecting fewer than half the visitors it took in last year in 2020, and state officials forecast its general fund revenues won’t recover to pre-pandemic levels until its 2025 fiscal year.

---

quote:

---

The U.S. economy has steadily recovered since the spring, and more than 11 million jobs of the 22 million lost earlier in the year have come back.

---

quote:

---

Earlier this year, Chris Kolb, budget director for the state, calculated that even if he eliminated 12 state departments—including education, environment and treasury—and used up every penny in state reserves, Michigan would still be short $1 billion needed to balance his budget. Federal coronavirus aid and rainy day funds ultimately helped him balance the budget and cover Covid-related expenses, and some tax revenues were better than initially forecast. But the state is bracing for a shortfall of up to $2 billion for the next fiscal year, since $4 billion in tax revenue that the state anticipated back in January has disappeared.

---

quote:

---

The Willoughby-Eastlake City Schools near Cleveland lost $1.7 million in state funds this year, and expects to lose another $1.7 million in 2021. The school district made ends meet by halving its curriculum budget and buying fewer textbooks and other learning aids, among other cuts. If the money doesn’t arrive eventually, the district will have to reduce course offerings, said Superintendent Steve Thompson. School systems also usually receive local funds through property taxes. This year, the Willoughby-Eastlake system has so far received $800,000 less than last year, the district’s treasurer said, as out-of-work residents struggle to pay the tax.

---

quote:

---

Teachers are recording classes so that students in families sharing one computer can watch lessons that they miss because their siblings are using the computer for their own online classes. “If they have a question, they’re going to have to wait until the next day when it’s their turn to have the Chromebook from their brother or sister,” Mr. Thompson said.

---

quote:

---

New York, projecting a shortfall of $59 billion through 2022, held back scheduled payments for schools and social services and postponed public worker raises.

---

quote:

---

Florida’s governor vetoed spending on a range of items including a new state courthouse, trade schools and appropriations for local projects.

---

quote:

---

Many states are pleading for more aid from Congress, which has so far sent money in its coronavirus relief packages to deal with the health crisis but not to offset revenue losses. Congress has doled out about $150 billion in Covid-19 response dollars to state and local governments, plus some additional money to cover elevated Medicaid costs. The money sent to local governments has helped pay for needs like personal protective equipment. But it can’t be used to replace revenue lost as a result of the shutdown.

---

quote:

---

President Trump and Senate Majority Leader Mitch McConnell have said they don’t want Covid-19 aid used to address longstanding financial problems. Mr. McConnell suggested in April that states should be allowed to file for bankruptcy to address their pension debt. Mr. Trump asked in a tweet that month: “Why should the people and taxpayers be bailing out poorly run states like Illinois?”

---

quote:

---

Illinois, with the worst finances of any state, has been banking on billions in federal funding. The state has a $230 billion pension liability after years of putting off payments, according to an estimate by Moody’s Investors Service, and faces an additional $8 billion backlog of unpaid bills. Since the pandemic, Illinois’s total retirement and debt liabilities are on track to make up 45% of the state’s gross domestic product by June 2021, up from 35% in 2019, according to Moody’s Investors Service.

---

quote:

---

Illinois issued $1.2 billion in notes, but the funds are expensive, with an interest rate about 10 times the level typical in the market. [this is Greece type disaster stuff here]

---

quote:

---

The airport authority of Rock Island County, Ill., for example, disclosed in August that it hasn’t been able to collect enough in airline ticket fees to maintain the level of cash it promised bondholders it would set aside.

---

quote:

---

In Connecticut, debt costs have reduced the state’s spending flexibility. Before the pandemic, yearly payments on bond debt, pensions and retiree health obligations absorbed 31% of state-generated revenue, according to Moody’s Investors Service, making it one of the most indebted states in the nation. Almost a third of its total debt is local teacher pension and retiree health-benefit obligations, Moody’s Investors Service said

---

quote:

---

Community Health Resources, which offers mental-health and addiction services to 27,000 children and adults, is concerned it won’t receive its expected more than $40 million in state funding—62% of the organization’s annual budget—in the next fiscal year

---