COVID-19

45 states just started a new fiscal year. None are celebrating.

Erika Beras Jul 8, 2020
Heard on: Marketplace
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Public health workers in Denver check in with people waiting to be tested for COVID-19 in March. The fight against the pandemic has contributed to state budget shortfalls. Michael Ciaglo/Getty Images
COVID-19

45 states just started a new fiscal year. None are celebrating.

Erika Beras Jul 8, 2020
Public health workers in Denver check in with people waiting to be tested for COVID-19 in March. The fight against the pandemic has contributed to state budget shortfalls. Michael Ciaglo/Getty Images
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In 45 states, you can wish state officials a happy new year. That’s because they started new fiscal years a week ago, on July 1. All of them are heading into this new year with reduced revenue, shaky budgets and a lot of uncertainty.

What a difference six months make. Urban Institute fellow Kim Rueben said when the calendar year started, states were feeling optimistic.

They were “predicting more money coming in, then they were forecasting more money possibly than the year before,” Rueben said. “And then March happened, and the bottom dropped out.”

People stayed home and spent less — there went sales tax. Millions of people lost their jobs — there went a whole bunch of income tax. Meanwhile, Rueben said, states had to spend more on swelling Medicaid rolls and soaring unemployment claims, all while beefing up their response to the health impact of the coronavirus pandemic. Kind of like a typical recession but it’s “much more dramatic right now because of the suddenness, and how we closed the economy. And the fact that this is all being driven by this public health issue.”

States got some help from the federal government, and some dipped into their rainy-day funds. They also got help from the expanded unemployment benefits and relief checks.   

Kathryn White, director of budget process studies with the National Association of State Budget Officers, said those “have helped temporarily prop up the economy, and therefore state tax revenues, but those are going to run out.”

The Tax Policy Center estimates that states ended last fiscal year with $75 billion in shortfalls and face an additional $125 billion in this one. And there’s a lot of uncertainty playing into that number, according to Jeffrey Clemens, an economics professor at the University of California, San Diego.

Businesses may open or stay closed, and COVID-19 cases keep rising. State budget officials don’t have a full picture of what they’re working with. Going forward, Clemens said, states can either raise taxes “or they can find ways to scrimp and save and cut expenditures.”

Some states are already doing that. Washington is furloughing workers, and Ohio is planning cuts to K-12 education. And then there’s borrowing.

“Given the magnitude of the problems that they’re facing, they’re going to have to consider all the options that are on the table,” said Adam Levin, with the state fiscal health team at the Pew Charitable Trusts. 

He said the Federal Reserve has set up a new borrowing program for states, but so far only Illinois has tapped it. 

COVID-19 Economy FAQs

It’s still the question on everyone’s minds: What’s going on with extra COVID-19 unemployment benefits?

The $600-a-week payments have ended, officially, as of July 31. For now, there is no additional federal pandemic unemployment assistance. House Democrats want to renew the $600 payments. Senate Republicans have proposed giving the unemployed 70% of their most recent salary by this October, when state unemployment offices have had time to reconfigure their computer systems to do those calculations. Until then, jobless workers would just get another $200. But, nothing has been signed into law yet.

What’s the latest on evictions?

For millions of Americans, things are looking grim. Unemployment is high, and pandemic eviction moratoriums have expired in states across the country. And as many people already know, eviction is something that can haunt a person’s life for years. For instance, getting evicted can make it hard to rent again. And that can lead to spiraling poverty.

Which retailers are requiring that people wear masks when shopping? And how are they enforcing those rules?

Walmart, Target, Lowe’s, CVS, Home Depot, Costco — they all have policies that say shoppers are required to wear a mask. When an employee confronts a customer who refuses, the interaction can spin out of control, so many of these retailers are telling their workers to not enforce these mandates. But, just having them will actually get more people to wear masks.

You can find answers to more questions on unemployment benefits and COVID-19 here.

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