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States dealt blow with pandemic

April 02, 2020
By: Laura Lacy Graham

In general, the effect of the pandemic on states’ budgets due to the wave of business, retail, and commerce shutdowns, as well as other reduced economic activity across the nation, is not entirely known, or too early to forecast; however, a number of states are beginning to experience the initial impacts of a substantial downturn. With several states having already enacted their 2020-21 budgets, special sessions are expected later this year to deal with declining revenues. Others ended sessions early without a new fiscal year spending plan in place. Many are also acting quickly to help mitigate the effects of lost revenues and an increased demand for services. Some of the states’ impacts and actions are outlined below.

  • Alaska officials report that the drop in global oil prices will likely add $300 million to the state's current year (2020) budget deficit. The Alaska Journal of Commerce reports the state Legislative Finance Division told lawmakers that the state could experience a $600 million revenue reduction in the 2021 fiscal year, which starts July 1.
  • In Arkansas, lawmakers were called into special session to address an estimated $353 million hit to the state’s current (FY 2020) budget.
  • California Gov. Gavin Newsom warned state agencies to prepare for less funding and the postponement of many of the state's ambitious spending plans. State economists are predicting that the state’s $21 billion rainy day budget will be depleted in months by the fast-moving coronavirus pandemic and Newsom already authorized transferring $1.3 billion from one of the state’s reserve funds to purchase supplies and equipment in dealing with the pandemic.
  • Revenue projections for Colorado — which hasn’t yet passed its fiscal year 2020-21 budget — slid by $900 million for fiscal 2020-2021 in a recent estimate.
  • The council that sets Delaware’s revenue forecasts is warning of a potential lasting economic downturn due to the coronavirus, projecting a drop of $94.1 million in revenue for the upcoming fiscal year.
  • Hawaii reported it would get $340 million less for its budget biennium after the state started closing to visitors, and its unemployment rate is projected to soar to 25 percent later this year, caused by the economic free-fall triggered by the coronavirus disaster.
  • Idaho Gov. Brad Little issued Executive Order 2020-06, which directs the transfer of $39.3 million of state reserves to the Disaster Emergency Account to deal with critical needs within the state due to the pandemic. The governor also signed Executive Order 2020-05, which reduces the state agencies’ spending in the current fiscal year by 1-percent, which will save approximately $40 million statewide.
  • A report from the state of Illinois government’s forecasting group said that determining the impact of the COVID-19 pandemic on the state’s tax revenues was “virtually impossible” at the moment, but the commission estimated that it could result in a loss of more than $8 billion over several fiscal years.
  • A Louisiana State University economist recently warned state officials that Louisiana was facing an impending and steep recession.
  • According to the Massachusetts Taxpayers Foundation, the state’s tax collections for the current fiscal year could fall as much as $500 million below benchmarks due to lost economic activity and warned that the impact of fiscal 2021 revenues falling by 3-5 percent would range from $2 billion to $3 billion.
  • Michigan’s Gov. Gretchen Whitmer announced a supplemental budget action to free up $150 million of state budget money to fight COVID-19 and has temporarily suspended hiring, creating new positions or filling vacant ones, transfers, and promotions within the executive branch of state government.
  • Only a month ago, Minnesota officials said the surplus for the fiscal year that goes through June would be $1.5 billion — $200 million more than previously expected. Gov. Tim Walz recently proposed in his biennium supplemental budget that most of the surplus should be set aside to deal with uncertainties brought by the virus.
  • Mississippi’s economy could take up to a $6.6 billion hit this year as the coronavirus crisis continues to deepen, according to the state's pandemic plan.
  • Last week, Missouri Gov. Mike Parson said his proposed state budget for the 2021 fiscal year beginning in July would have to dramatically change, but how is unknown at this time. The Missouri House and Senate are both on hiatus until further notice, but before the House suspended their session, it approved a supplemental budget that includes $40 million in federal and state funds to help fight COVID-19. However, state Senators have yet to vote on the supplemental budget.
  • Montana lawmakers and the governor’s budget director agree that it is unlikely the state will run into an immediate budget issue as it deals with the coronavirus pandemic and related economic impact; however, that could change if the crisis drags out long enough that response efforts drain the state’s emergency funds, or if economic fallout cuts into tax collection over the coming months. 
  • New Mexico Gov. Michelle Lujan Grisham is expected to call a special session to deal with adjustments and budget cuts to the newly enacted FY 2021 spending plan due to revenue declines related to the global health crisis and the drop in oil and gas prices. The administration has indicated that it needs time to assess the state's current coronavirus issues before calling a session, and are working on contingency budgets.
  • New Jersey Gov. Phil Murphy’s administration put $920 million in planned FY 2020 spending in reserve in response to ongoing concerns that the coronavirus outbreak could take a huge chunk of revenue out of the state budget. The spending freeze was enacted on March 20, according to a state bond disclosure, which noted that the impact of the coronavirus on the state’s economy and finances “unpredictable and rapidly changing.”
  • New York State Budget Director Robert Mujica, an appointee of Gov. Andrew Cuomo, said the state expects its gross domestic product to shrink in the second quarter of this year and possibly beyond, while state revenue could fall by as much as $15 billion as a result of the novel coronavirus and its effect on the economy.
  • In Ohio, Gov. Mike DeWine ordered a hiring freeze in agencies under his control, asked administration officials to cut their budgets by up to 20 percent, and was talking with state lawmakers about dipping into the state’s $2.7 billion rainy-day fund.
  • Oklahoma Gov. Kevin Stitt announced that he plans to tap the state’s Rainy Day Fund, which is at an all-time high, to offset the possible revenue shortfall this year and to help balance the fiscal year 2021 budget. In the past year, Oklahoma state government’s total savings have reached $1 billion, a historic level. State lawmakers were expected to face a shortfall of $85.5 million for the 2021 budget, that figure has increased dramatically during the past few weeks with the drop in oil prices coupled with national business shutdowns, with the estimated shortfall for the 2021 budget being another $450 million to $500 million. Combined with the $85.5 million shortfall certified in February, that would bring the total decline for the 2021 budget to nearly $600 million. State officials are expected to declare a revenue failure for FY 2020 soon.
  • Saying that she is “gravely concerned” about Oregon’s ability to deliver basic services over the next six months to a year due to the economic fallout from statewide closures and massive lay-offs, Gov. Kate Brown called for a special session to approve and implement $250 million in emergency funding. Lawmakers will meet in early April. While the full damage to the state’s revenue will not be clear until mid-May, Oregon’s expected $1.5 billion tax surplus is in doubt.
  • The Wolf administration has laid off 2,500 Pennsylvania part-time and seasonal state employees and interns as the financial fallout of the coronavirus deepens.
  • According to a study released by ABEXUS Analytics, Puerto Rico’s already-battered economy stands to lose between $3 billion and $3.9 billion during the island’s current month-long lockdown, which was enacted via an Executive Order from Gov. Wanda Vázquez on March 15, and it could be as much as $10.1 billion if the period stretches to three months.
  • Rhode Island State General Treasurer Seth Magaziner told lawmakers and the public that the state’s government is “weeks, not months” away from running out of money to pay its bills and payroll amid the COVID-19 public health emergency, and has been forced to borrow $300 million just to meet cash flow.
  • South Dakota Gov. Kristi Noem will convene a special session for new legislation on the state budget, which was passed earlier this month, in response to an expected economic downturn caused by COVID-19. The session will take place sometime in June when lawmakers will have a clearer view of the pandemic's economic ramifications and could involve a complete re-write of the spending plan
  • In Tennessee, anticipating the economic impacts of the coronavirus pandemic on the state, Gov. Bill Lee revised his FY 2021 budget plan, which forecasts no economic growth for the new fiscal year, and taps into the state's reserves. Previously, he anticipated a growth rate of 3 percent.
  • Texas Comptroller Glenn Hegar briefed state lawmakers on the Texas economy and budget, saying that while it was too soon for specific forecasts, both are expected to take potentially massive hits in the wake of the new coronavirus pandemic. Hegar referred to the economy as “the current recession” and predicted that the state’s general revenue for the biennium budget and its savings account balance will be drastically lower — possibly by billions of dollars — when he makes a revised fiscal forecast in July. In addition, Hegar announced that the unemployment rate in the state is on track to more than double as the new coronavirus spreads. In January, the rate was 3.5 percent, economic research firms have moved their recent forecasts to 9 percent. His office is also considering budget cuts to state agencies.
  • Utah Gov. Gary Herbert released a three-phase “plan for a health and economic recovery,” which seeks to minimize an economic downturn in his state caused by the coronavirus pandemic. The governor also called for a special legislative session. State lawmakers are planning to meet in what will likely be the first virtual special session soon to transfer an estimated $840 million from the new $20 billion budget passed earlier this month in order to address the state’s expected deficit.
  • Vermont lawmakers and officials are estimating a 15 to 17 percent decline in tax revenues due to the economic downturn because of COVID19.
  • Virginia’s top finance official says the state is likely to lose $1 billion in revenue in each year of the pending two-year budget — and that’s the best scenario. Secretary of Finance Aubrey Layne shared the outlook with Virginia’s state legislators. He noted that it was possible the state could lose as much as $2 billion in the state’s second year of the biennium, but is hoping the revenue loss can be limited to $1 billion.
  • Facing the uncertainty of an economic downturn from the novel coronavirus, Washington state lawmakers significantly changed their supplemental budget plan. The recently approved revised operating budget will now leave a cushion of $918 million in projected revenue unspent, which is a significant change from an expected budget crafted in February, when the budget proposals by the House and Senate had ending fund balances of less than $10 million.
  • West Virginia is losing up to $9 million in tax revenues every week after it closed its casinos and lottery services to stem the spread of the coronavirus.
  • Projections earlier this year showed that Wisconsin was expected to end its biennium with $620 million in the general fund; however, state lawmakers recently said it’s likely that, due to the economic fallout from COVID-19, there would not be a budget surplus. Meanwhile, the Evers administration has forwarded a plan that spends more than $700 million to help combat the novel coronavirus and its cascading fallout under a sweeping bill, which seeks to direct more funding to various agencies. Parts of the legislation have bipartisan support and were developed with legislative GOP leadership.
  • Wyoming lawmakers will hold a special session tentatively scheduled to start on Apr 16 and are expected to address the declines in state revenues due to the drop in oil prices and the coronavirus pandemic. Lawmakers believe the state's next biennium budget, which was passed and signed last month, may need to be completely re-written.
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