The Coronavirus Pushes State Budgets to the Brink

The Coronavirus Pushes State Budgets to the Brink

The Coronavirus Pushes State Budgets to the Brink

Cuts will fall the hardest on those who have been on the front lines of the crisis.

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EDITOR’S NOTE: The Nation believes that helping readers stay informed about the impact of the coronavirus crisis is a form of public service. For that reason, this article, and all of our coronavirus coverage, is now free. Please subscribe to support our writers and staff, and stay healthy.

The coronavirus crisis has pushed state and local governments to the edge of a budget cliff; some have already started their tumble into the abyss. State tax revenue dropped by almost 50 percent in April compared to a year earlier as businesses shuttered and people delayed paying taxes. Meanwhile, these governments are spending vastly more to meet residents’ increased health and economic needs.

The hole left by a loss in revenue coupled with higher spending is going to be very, very deep. The Center on Budget and Policy Priorities projects that the recession caused by the pandemic will create a $615 billion shortfall over this fiscal year and the next. The most difficult year will be 2021, as states face a $315 billion deficit. That’s worse than in 2010, the height of the Great Recession, when states had to grapple with a $230 billion loss.

Given what happened during the last downturn, we can predict what is going to take place. In the wake of the Great Recession, many states pulled back sharply on spending, leading to public sector layoffs just as the economy was trying to recover. States are legally required to balance their budget every year, so they will have to compensate for coronavirus-related expenses somehow. Most will turn to devastating cuts, and those cuts will fall the hardest on those who have been on the front lines of the crisis.

Nurses and doctors fighting the pandemic have received nightly applause across the country and thanks on TV. But as their states retrench to deal with the fiscal crisis, they’ll get pink slips and benefit cuts. In 2017, state and local governments spent $294 billion on health and hospitals, or 10 percent of all spending. It’s the fourth-largest category of spending, after elementary and higher education and public welfare.

Fire departments make up a smaller portion of state and local budgets. But they’ll still be on the chopping block, which means the paramedics who have been responding to Covid-19 cases will get hit, too.

Meanwhile, states spent a combined $660 billion on schools in 2017, or more than a fifth of their budgets. This funding pays for public school teachers who have scrambled to keep their students connected and educated as the pandemic pushed us all into our homes. If schools reopen in September, it will be with even higher costs for extra nurses to ensure students are healthy, support staff for those who fell behind, and equipment needed to comply with new health protocols.

The job losses are already piling up. State and local governments have fired or furloughed nearly 1.5 million people since February. That’s nearly twice as many as during the entirety of the Great Recession.

The loss of revenue from elective procedures has been hammering hospital budgets, leading 266 facilities to furlough or lay off thousands of employees. As of early May, fire departments had laid off 935 people, including emergency medical technicians and paramedics, and a survey by the International Association of Fire Chiefs projected 30,000 jobs lost this year and next. Chiefs have been asked to propose budget cuts of 10 to 25 percent for their departments, often including emergency medical services.

Teachers are feeling the deepest pain. Local education jobs—most of which are filled by educators who have had to put in extra work to reconfigure the way they teach—have fallen by almost 670,000 since February. The nearly 450,000 lost in April alone were more than those lost over the entire Great Recession.

So far, the aid that Congress has sent to states pales in comparison with the need. The Treasury Department has said that $110 billion in relief funding can’t be used to make up state revenue shortfalls, which means all they’ve gotten for that purpose is $65 billion.

In March, Senate majority leader Mitch McConnell praised frontline health care workers, EMTs, and teachers as “American heroes.” But a month later, he opposed giving federal aid to states, calling it a bailout for those with large pension obligations. The need has nothing to do with poor financial planning, and it’s a problem afflicting red and blue states alike. Without help from Congress, the very people who have uprooted and sometimes risked their lives to care for and support the rest of us will be the hardest hit.

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