Congress is expected in coming weeks to consider additional assistance for states, businesses and the unemployed, but it’s far from guaranteed that any more money will flow from Washington, DC, to state capitals.
On Monday, a coalition of seven organizations, including the National Governors Association, the National Association of Counties and the US Conference of Mayors, wrote a letter to Senate Majority Leader Mitch McConnell and Minority Leader Chuck Schumer, stressing the role state and local governments play in the economy and employment.
“More robust and direct stimulus is needed for state and local governments to both rebuild the economy and maintain essential services in education, health care, emergency operations, public safety and more,” said the letter, which was signed by more than 170 businesses and groups.
Two state budget watch groups recently released updated revenue forecasts for the coming years.
Moody’s Analytics now says that states will need about $312 billion and municipalities about $150 billion in additional federal assistance over two years to avoid massive cuts, which could shave about 3 percentage points off the national economy and eliminate about 4 million jobs. A few months ago, the research firm estimated Congress would only need to provide states with another $240 billion in funding over two years.
“What was the severe fiscal stress scenario in March has evolved into the baseline,” said Dan White, Moody’s director of public sector research.
Still, states need more federal help to avoid widespread and devastating cuts to personnel and services, said Wesley Tharpe, the center’s deputy director of state policy research.
Cuts to workforce and schools
While they wait for Congress, states and municipalities have slashed their workforces. In April and May alone, they furloughed or laid off more than 1.5 million workers — about twice as many as during and immediately after the Great Recession. Local government workers, particularly those in schools, were hit the hardest, losing nearly 1.3 million positions over those two months.
More than 40,000 Washington state employees will have to take one furlough day a week through July 25 and then one day a month through the fall, Democratic Gov. Jay Inslee announced earlier this month. Plus, another 5,600 higher-paid workers will not see a 3% wage increase. Together, the moves will save about $55 million over the next year.
Governors in some states used their executive authority to reduce funding for fiscal 2020, which ends June 30 in 45 states, after revenue came up short.
Ohio’s Republican Gov. Mike DeWine, for instance, cut spending by $300 million on public schools, by $210 million on Medicaid, by $110 million on higher education and by $100 million on all other agencies for the current fiscal year.
Though some of the reductions are being offset by federal funding, it will not make up all of the losses, said Wendy Patton, senior project director of Policy Matters Ohio, a left-leaning group. Schools are contending with higher costs to teach students amid the pandemic, and universities are hemorrhaging jobs, she said.
“I’ve seen spreadsheets that show a great number of districts showing red ink for the fall,” Patton said. “They are getting less money than they anticipated.”
Colorado lawmakers, who had to slice $3.3 billion out of a roughly $13 billion general fund budget for fiscal 2021, are also counting on federal funds to make up most of the deep reductions to public schools and colleges.
The fiscal 2021 budget cut about $540 million from K-12 operations, but the state received $510 million in federal relief money for schools. And they slashed 58% of state support for higher education, about $493 million, but that department was given $450 million in federal funds.
“We were able to take a little bit more [from the] general fund from both of those entities knowing that they would have some federal dollars to help see them through,” said Rep. Daneya Esgar, chair of the Joint Budget Committee. “So we took some pretty big cuts there.”
States are trying to buy time
Several states, however, are trying to avoid any bloodshed for now. Five states, including Pennsylvania and South Carolina, have passed temporary spending plans that will get them through the next few months at least.
Other states, however, will likely have to revise their budgets in the middle of the fiscal year to make sure they are in line with revenues, said Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers.
“A large number of states are planning on revising their budgets as fiscal 2021 carries on,” he said. “They’ll take whatever steps are necessary to make sure it’s balanced by the end of the fiscal year.”