The coronavirus economic shutdown is putting the squeeze on state budgets across the country, threatening to keep public pools, community centers and other services shuttered long after the end of stay-at-home orders.
Governors, who have lobbied for a $500 billion federal bailout that so far isn’t coming, warily eye tough trade-offs this year and possibly beyond to balance budgets walloped by dwindling sales and income tax revenue, the states’ two biggest revenue streams.
The crunch is compounded by soaring spending on Medicaid, the biggest expenditure after public schools for most states, as more people lose their jobs and become eligible for the government health insurance program for low-income individuals.
“States may not see the full fiscal impact of coronavirus for months, even years, and effects could linger for years to come,” said Josh Goodman, senior officer for economic development and state fiscal health at the Pew Charitable Trusts.
Unlike the federal government, which runs on debt, 40 of the 50 states operate under statutory or constitutional mandates to balance the budget. They have to either generate the revenue or make unpopular cuts in places such as public schools, state worker pay, law enforcement or recreation centers.
Governors and state lawmakers prefer that Washington fork over $500 billion to help them avoid slashing spending to offset plummeting tax receipts.
The deal Congress finalized Tuesday for extra spending includes $310 billion for small business grants and $160 billion for hospitals, virus testing and disaster loans — but not a dime to replenish state coffers.
New York Gov. Andrew Cuomo, a Democrat wrestling with a $15 billion budget deficit, said that passing over states was a “terrible mistake.”
“I get small businesses, I get airlines,” he said of other aid recipients. “How about police? How about fire? How about health care workers? How about teachers? … I don’t get it. That’s why I’m not in Washington.”
Earlier this week, Mr. Cuomo said New York could suffer a 50% cut in education funding because of the shortfall.
President Trump promised that the next economic rescue package would include money for state governments.
“After I sign this Bill, we will begin discussions on the next Legislative Initiative with fiscal relief to State/Local Governments for lost revenues from COVID 19, much needed Infrastructure Investments for Bridges, Tunnels, Broadband, Tax Incentives for Restaurants, Entertainment, Sports, and Payroll Tax Cuts to increase Economic Growth,” Mr. Trump said in a series of tweets.
Budget woes from the COVID-19 pandemic are afflicting state capitals across the country:
⦁ Kansas projected an 8.1% budget shortfall in the state’s two-year budget, with expected tax collections over the next 15 months falling nearly $1.37 billion.
Gov. Laura Kelly, a Democrat, had already ordered state agencies to eliminate discretionary spending and avoid filling vacant posts not essential to dealing with COVID-19, the respiratory disease caused by the coronavirus. The belt-tightening and cash reserves likely won’t be enough to plug an estimated $653 million budget hole.
“The unprecedented revenue collapse turned Kansas finances upside down overnight. It is the rainy day we feared could come,” Ms. Kelly said.
⦁ Illinois Gov. J.B. Pritzker, a Democrat, announced that the state faces a $10 billion deficit — $2.7 billion this year and $7 billion next year — because of the coronavirus crisis.
“You don’t have to be an epidemiologist to see the pandemic is going to have a big impact on our budget,” Mr. Pritzker said. “We will need to make extraordinarily difficult decisions on top of the difficult decisions we’ve already made.”
⦁ Oklahoma Gov. Kevin Stitt, a Republican, announced an anticipated $416 million shortfall in this year’s state budget, which was hit with a double whammy of plunging oil prices and the economic quarantine.
⦁ Hawaii Gov. David Ige, a Democrat, needs to cut $1.5 billion from the state budget because of lost revenue from the pandemic. He is considering a 20% cut to government employee pay, which drew a sharp rebuke from state workers unions.
“While we recognize the coronavirus has already started to cripple Hawaii’s economy, no one can be sure of its long-term impacts. We believe cutting salaries for tens of thousands of state workers is rash and will hurt our state even more,” said Hawaii State Teachers Association President Corey Rosenlee.
⦁ California, which boasted a budget surplus of $17 billion before the crisis, now confronts a worst-case scenario of a $35 billion deficit this year and an $85 billion deficit down the road, according to state budget experts.
“We are now in a pandemic-induced recession here in the state of California,” said Gov. Gavin Newsom, a Democrat.
The budget pain reaches down to county and local governments.
The National Association of Counties released a report this month projecting that county budgets could take a collective $144 billion hit through fiscal 2021.
With lost revenue and increased expenses, smaller counties may have to cut a quarter of their budgets. They are looking for federal dollars, too.
“A strong federal-state-local partnership has become more crucial than ever,” said NACo Executive Director Matthew Chase. “We call on Congress and the administration to provide direct funding to support the vital services counties deliver.”
⦁ David Sherfinski contributed to this report.
• S.A. Miller can be reached at smiller@washingtontimes.com.
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