MESSAGE
| DATE | 2020-07-08 |
| FROM | Ruben Safir
|
| SUBJECT | Subject: [Hangout - NYLXS] State Budget Collapse
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Recession Forces Spending Cuts on States, Cities Hit by Coronavirus
David Harrison
10-12 minutes
State and local governments from Georgia to California are cutting money
for schools, universities and other services as the coronavirus-induced
recession wreaks havoc on their finances.
Widespread job losses and closed businesses have reduced revenue from
sales and income taxes, forcing officials to make agonizing choices in
budgets for the new fiscal year, which started July 1 in much of the
country.
Governments have cut 1.5 million jobs since March, mostly in education,
and more reductions are likely barring a quick economic recovery. In
Washington state, some state workers will take unpaid furloughs. In
Idaho, Boise State University cut its baseball and swim teams in an
effort to save $3 million.
Dayton, Ohio, Mayor Nan Whaley says the city may have to cut up to 8% of
its general fund budget, which pays for fire, police, roads, water and
trash collection.
Dayton, Ohio, Mayor Nan Whaley says the city may have to cut up to 8% of
its general fund budget.
Photo: Maddie McGarvey for The Wall Street Journal
Im concerned well have to lay folks off before the end of the year, Ms.
Whaley said.
Nationwide protests sparked by the killing of George Floyd at the hands
of Minneapolis police have heightened attention to municipal budgeting.
In many cities, protesters are demanding that police budgets be cut or
money redirected toward social services.
Across the country, the weeks before July 1 were marked by a scramble to
complete spending plans. The task has been complicated by uncertainty
over the economic outlook, which depends largely on unknowns such as the
course of the virus and how quickly a vaccine can be developed. As a
result, budgets may have to be rewritten in the coming months.
I dont think you can overstate the amount of uncertainty that states are
dealing with, said Tracy Gordon, an expert on state and local budgets at
the Urban Institute in Washington. Youre asking revenue estimators
basically to consult epidemiological models and public health experts
and take account of all kinds of variables that are normally not part of
their forecasts.
Revenue VolatilityYear-over-year change in state and localquarterly tax
receipts.Source: Commerce Department
%RECESSION
2007'10'15'20-20-15-10-5051015
Adding to the uncertainty: Many states pushed back the income-tax-filing
deadline to July 15 from April 15, following the U.S. Treasurys lead.
While that should bring a short-term revenue boost, officials dont know
how much revenue to expect in the months ahead.
It is also unclear whether states will get more help from Congress,
which in March provided $150 billion but limited its use for pandemic
response. Dayton got about $8 million and will use it to buy face masks
for residents, Ms. Whaley said.
The National Governors Association says states need another $500 billion
in federal aid to make up for lost revenue. The U.S. Conference of
Mayors says cities need $250 billion.
The Democratic-led House in May passed a bill that included $1 trillion
to help state and local governments.
But Republican senators have paused discussion on another fiscal package
until later this month.
Why Another Coronavirus Stimulus Package May Be Tough to Craft
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Why Another Coronavirus Stimulus Package May Be Tough to Craft
Why Another Coronavirus Stimulus Package May Be Tough to Craft
Congress is eager to pass the next phase of coronavirus stimulus
legislation, but the bipartisan spirit that was present months ago may
be frayed as both parties weigh their differences. WSJs Gerald F. Seib
explains. Photo: Eric Gay/Associated Press
Almost all states and local governments require balanced budgets. For
now, they have largely avoided raising taxes to plug budget holes,
opting instead to cut spending or dip into reserves.
In Georgia, Gov. Brian Kemp signed a budget bill that reduces spending
by about 10%, including a $950 million cut to the main state education
fund. Some poorer school districts rely on the state to cover 70% of
operating expenses, said Margaret Ciccarelli, director of legislative
services for Page Inc., the states teachers association.
These are challenging times and the budget reflects that reality, Mr.
Kemp, a Republican, said in a signing ceremony on June 30.
Maryland imposed $412 million in cuts, of which $136 million will come
from higher education, an 8% reduction. Funding was also reduced for
Washington, D.C.-area transit system, neighborhood revitalization and
drug treatment.
These are challenging times and the budget reflects that reality, said
Georgia Gov. Brian Kemp.
Photo: Elijah Nouvelage/Bloomberg News
Such cuts, though painful, could have been worse, experts say. The
decadelong economic expansion that ended in February allowed states to
replenish rainy-day funds. The median state went into the crisis with
reserves totaling a record 7.8% of its general fund budget, according to
the National Association of State Budget Officers.
California lawmakers used $9 billion of their $16 billion rainy-day fund
to help balance the $202 billion budget that Gov. Gavin Newsom, a
Democrat, signed June 29. Even so, state employees will have to take up
to two unpaid furlough days a month, and public colleges and
universities face about $602 million in reductions.
Some states are putting off hard decisions. New Jersey Gov. Phil Murphy,
a Democrat, signed a $7.6 billion stopgap budget for the next three
months, which cuts $1.2 billion in previously allocated spending.
SHARE YOUR THOUGHTS
What impact do you expect state budget cuts to have on your community?
Join the conversation below.
With an uncertain outlook, officials are trying to maintain reserves in
anticipation of more lean years.
You may need to use it in 2022 and beyond, said Brian Sigritz, director
of state fiscal studies at the budget officers association. Theyre not
expecting this decline to be a one-year or two-year thing.
The fiscal squeeze comes as cities face demands to cut police funding in
the wake of Mr. Floyds killing. Los Angeles redirected $150 million from
the police departments nearly $2 billion budget to social services.
In New York, Mayor Bill de Blasio and the City Council struck a deal
that he said would cut the police budget by about $1 billion, to $5.2
billion, and protesters are demanding even larger reductions.
The Atlanta City Council narrowly defeated a proposal to hold back some
police funding until the department presented a plan to become more
inclusive and transparent.
The Atlanta City Council narrowly defeated a proposal to hold back some
police funding.
Photo: Steve Eberhardt/Zuma Press
Most years, Atlanta council members hear two to three hours of public
comment on the budget. This year, they listened to about 50 hours,
largely about police funding, said City Council President Felicia Moore.
To comply with social-distancing efforts, people called in to record
their comments rather than appear in person.
We had calls from people all over the world, Ms. Moore said.
Shrinking budgets could make it easier for city officials to heed calls
to cut police funding, said the Urban Institutes Ms. Gordon.
When revenues are constrained is exactly when you have some flexibility
to look at longstanding practices and ways of doing things and
potentially changing that, she said.
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Trump and Biden Take Different Approaches to Coronavirus Surge
Trump and Biden Take Different Approaches to Coronavirus Surge
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