The Journal Gazette
Monday, September 07, 2020 1:00 am

States seek more economic relief

Tax revenue drop will cause many to cut funding to programs

DAVID A. LIEB | Associated Press

Spending cuts to schools, childhood vaccinations and job-training programs. New taxes on millionaires, cigarettes and legalized marijuana. Borrowing, drawing from “rainy day” funds and reducing government workers' pay.

These are some actions states are considering to shore up their finances amid a sharp drop in tax revenue caused by the economic fallout from the COVID-19 pandemic.

With Congress deadlocked for months on a new coronavirus relief package, many states haven't had the luxury of waiting to see whether more money is on the way. Some that have delayed budget decisions are growing frustrated by the uncertainty.

As the U.S. Senate returns to session Tuesday, some governors and state lawmakers are again urging action on proposals that could provide hundreds of billions of additional dollars to states and local governments.

“There is a lot at stake in the next federal stimulus package and, if it's done wrong, I think it could be catastrophic for California,” said Assemblyman Phil Ting, a Democrat from San Francisco and chairman of the Assembly Budget Committee.

The budget that Democratic Gov. Gavin Newsom signed in June includes $11.1 billion in automatic spending cuts and deferrals that will kick in Oct. 15, unless Congress sends the state $14 billion in additional aid. California's public schools, colleges, universities and state workers' salaries all stand to be hit.

In Michigan, schools are grappling with uncertainty as they begin classes because the state lacks a budget for the fiscal year that starts Oct. 1.

Ryan McLeod, superintendent of the Eastpointe school district near Detroit, said it is trying to reopen with in-person instruction, “but the costs are tremendous” to provide a safe environment for students.

“The only answer, really, is to have federal assistance,” McLeod said.

Congress approved $150 billion for states and local governments in March. That money was targeted to cover coronavirus-related costs, not to offset declining revenue resulting from the recession.

Some state officials, such as Republican Gov. Eric Holcomb of Indiana, are pushing for greater flexibility in spending the money they already received. Others, such as Republican Gov. Mike DeWine of Ohio, say more federal aid is needed, especially to help small businesses and emergency responders working for municipalities with strained budgets.

In mid-May, the Democratic-led U.S. House voted to provide nearly $1 trillion of additional aid to states and local governments as part of a broad relief bill. But the legislation has stalled amid disagreements among President Donald Trump's administration, Republican Senate leaders and Democrats over the size, scope and necessity of another relief package. In general, Republicans want a smaller, less costly version.

The prospects for a pre-election COVID-19 relief measure appear to be dimming, with aid to states and local governments one of the key areas of conflict.

The bipartisan National Governors Association and Moody's Analytics have cited a need for about $500 billion in additional aid to states and local governments to avoid major damage to the economy. At least three-quarters of states have lowered their 2021 revenue projections, according to the National Conference of State Legislatures.

In some states, the financial outlook is not as dire as some had feared this year.

Previous federal legislation pumped money into the economy through business subsidies, larger unemployment benefits and $1,200 direct payments to individuals. The resulting consumer spending led to a rebound in sales tax revenue in some states. Many states also delayed their individual income tax deadlines from April to July, which led to a larger than usual influx of summer revenue from taxpayers' 2019 earnings.

In Vermont, where lawmakers are expected to work on a budget next week, a deficit that some had feared could reach $400 million now is pegged about $55 million. A predicted $518 million shortfall in Arizona for the current fiscal year has been revised to just $62 million.

State tax revenue often lags economic trends because individuals' income losses aren't reflected on tax returns until months later. As a result, experts warn that states might experience the lagging effects of the recession well into their 2021 and 2022 budget years.


Indiana closing in on 100,000 cases

The Hoosier State inched closer to the 100,000 mark of confirmed COVID-19 cases Sunday, reporting 851 new cases and two additional deaths.

There have been 99,804 confirmed cases, according to the Indiana State Department of Health. The death toll has reached 3,140.

Health officials said there are 224 more probable deaths based on clinical diagnoses in patients for whom no positive test is on record.

The state reported more than 1.1 million COVID-19 tests have been conducted.

– Journal Gazette

Sign up for our daily headlines newsletter

Top headlines are sent daily