U.S. States Face Biggest Cash Crisis Since the Great Depression - WSJ - 0 views
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“All you can do is grip the bar as tight as you can, make the smartest decisions you can in real time, plan for the worst and be surprised at something less than worst,” said Mr. Lembo.
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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.
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States are dependent on taxes for revenue—sales and income taxes make up more than 60% of the revenue states collect for general operating funds, according to the Urban Institute. Both types of taxes have been crushed by historic job losses and the steepest decline in consumer spending in six decades.
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Americans have since ramped up spending on everything from home improvements to bicycles with the help of stimulus checks sent to millions, though overall expenditures remain below pre-pandemic levels.
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A nationwide decline in combined state revenue has happened after only two events in 90 years: following the Sept. 11, 2001, attacks and in the aftermath of the 2008 financial crisis.
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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. Still, the unemployment rate recently hovered at 7.9%, and there has been an uptick in permanent layoffs.
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Economists warn a two-track recovery is emerging, with well-educated and well-off people and some businesses prospering, at the same time lower-wage workers with fewer credentials, old-line businesses and regions tied to tourism are mired in a deep decline.
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After 2008, some states implemented or added to rainy day funds—cash reserves that can be used to fill revenue gaps caused by a potential shock
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Schools received federal aid from the pandemic-stimulus packages passed by Congress earlier this year.
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The Ohio Education Association, a teachers union, said the state’s school districts could face budget shortfalls for the 2022 and 2023 budget years of between 20% and 25%.
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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.
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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.
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President Trump and Senate Majority Leader Mitch McConnell have said they don’t want Covid-19 aid used to address longstanding financial problems.
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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, which begins in July.