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Reports: Battered by the Coronavirus, States Face Steep Budget Cuts

U.S. News & World Report logo U.S. News & World Report 7/7/2020 Elliott Davis
Jared Polis et al. posing for the camera: DENVER, CO - MARCH 5: Gov. Jared Polis speaks during a press conference to address the first confirmed case of Coronavirus in Colorado at the Colorado Department of Public Health and Environment on Thursday, March 5, 2020. Gov. Jared Polis said the first confirmed individual is a man in his 30s, who traveled to Italy last month and was recreating in Colorado. Polis added that the man's girlfriend, who was traveling with him has been quarantined. A second case was reported during the press conference, but no information was provided by Polis or the officials flanking him. (Photo by AAron Ontiveroz/MediaNews Group/The Denver Post via Getty Images) © AAron Ontiveroz/MediaNews Group/The Denver Post via Getty Images DENVER, CO - MARCH 5: Gov. Jared Polis speaks during a press conference to address the first confirmed case of Coronavirus in Colorado at the Colorado Department of Public Health and Environment on Thursday, March 5, 2020. Gov. Jared Polis said the first confirmed individual is a man in his 30s, who traveled to Italy last month and was recreating in Colorado. Polis added that the man's girlfriend, who was traveling with him has been quarantined. A second case was reported during the press conference, but no information was provided by Polis or the officials flanking him. (Photo by AAron Ontiveroz/MediaNews Group/The Denver Post via Getty Images)

As many states enter new fiscal years amid the coronavirus pandemic, budgets already crushed by the crisis could see services slashed without additional federal support, according to recent reports.

Analysis released last week by the Peter G. Peterson Foundation, a nonpartisan organization dedicated to fiscal challenges, found that states are facing cuts to services such as education, health care and income support programs because of budget balancing requirements. Nearly every state has such a requirement, according to the report.

States' budget shortfalls are largely due to two different factors: supplemental appropriations in response to the pandemic and significant declines in tax revenues. For example, Colorado, New Jersey and New York are projected to see nearly 20% declines in general fund revenues in fiscal year 2021. Hawaii, Louisiana and Michigan are projecting declines greater than 10%.

Short of additional assistance from the federal government – which already provided $200 billion, including funding for education and mass transit agencies, to state and local governments through the CARES Act – states might have to resort to borrowing or tapping into their rainy day funds. The foundation's report notes that states entered the pandemic with about $72 billion in reserves, which is larger than they ever had previously, and some states have already started using rainy day funds to help their budgets. California Gov. Gavin Newsom recently declared a budget emergency which will allow the state to use rainy day funds during the next fiscal year, according to the report.

[MAP: The Spread of Coronavirus]

Another report, by The Pew Charitable Trusts, shows how much things have changed since many governors delivered State of the State addresses before the COVID-19 pandemic hit the U.S.

"Pre-pandemic speeches showcased priorities that now face long odds of becoming reality anytime soon," according to the report, which was released in late June. "Instead of pursuing new infrastructure projects or promised raises for teachers, for example, governors are fixated on how to fill growing gaps in their fiscal year 2021 budget plans."

Pew's analysis found that about 17% of State of the State speeches made before the crisis were focused on the economy, followed by nearly 15% on health and more than 13% on pre-college education. However, a "vast majority" of proposals made before the pandemic have not been enacted, largely because of declining revenues and state legislative sessions adjourning early.

"States face difficult choices from a menu that includes tax increases and spending cuts to education, health, public safety or transportation services that residents rely on," the authors wrote.

Copyright 2020 U.S. News & World Report


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