RENACCI: Poorly-Run States Shouldn’t Get A Bailout
The devastation created by the coronavirus has not spared anyone, including state governments. Many are now looking at massive spending deficits, as high as $25 billion in the case of California. The holes in their budgets are likely to persist past this fiscal year, and states will be eyeing the federal government for a much-needed bailout. While it makes perfect sense to help states with coronavirus-related financial problems, federal aid should not be going to state governments who have been spending frivolously for years.
According to the Center on Budget and Policy Priorities, a progressive think tank, states’ overall budget shortfalls will be an estimated $500 billion from 2020 through 2022 due to coronavirus. Even after accounting for states’ rainy day funds, which are at historical highs for most, the fiscal hole is still expected to be around $360 billion. This is primarily due to astronomical decreases in tax revenue from significant industries. According to Goldman Sachs, states will lose about 90 percent of their expected revenue in the areas of casino gambling, packaged tours, sports and entertainment.
After the Great Recession a decade ago, many states began creating hefty rainy day funds. Most states have more considerable rainy day funds than at any other time in their history. Wyoming, for instance, has reserves equal to 109 percent of their annual government expenditures. Many cannot use them all in a single fiscal year. California has $16 billion in reserves but can only spend half in any given year and is expected to have budget shortfalls of at least $25 billion for the next two fiscal years, with billions more in the years to follow.
Other states that have been hit hardest by the virus — like New York — are expected to see a $61 billion deficit over the next four years. Illinois needs $20 billion to help fund their state pensions and municipalities after it is expected to lose about $7 billion in lost taxes in fiscal years 2020 and 2021.
This is not isolated to blue states. Arizona, Alaska, Ohio and Wyoming are all facing billion-dollar deficits caused by the coronavirus. Ohio’s Republican Gov. Mike DeWine is looking to slash 20 percent of the state’s budget to make up for its shortfalls, but even that will not stop the bleeding.