‘We Have No Money’: Coronavirus Slams State Taxes

By: - April 2, 2020 12:00 am

Casinos and other businesses are shuttered on the Las Vegas Strip due to the COVID-19 pandemic. As the economy sputters, states and cities will see revenue declines. Erik Kabik Photography/MediaPunch/IPX via AP

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DENVER — Economists who advise the Colorado legislature told lawmakers in mid-March to expect a roughly $800 million revenue decline for the next fiscal year as people travel and dine out less during the coronavirus pandemic.

That estimate already looks far too optimistic. “The forecast that we released in March — we weren’t imagining the world that we’re living in right now,” said Kate Watkins, chief economist for the Legislative Council Staff, the nonpartisan research arm of the Colorado General Assembly.

Governors nationwide have ordered businesses to close and people to stay home in order to slow the spread of the novel coronavirus. But the public health measures have created an economic crisis that will, in turn, hit state and city budgets.

Now policymakers are scrambling to figure out how much spending power they’re losing at a moment when they need money to fight the pandemic and help laid-off workers and struggling businesses.

Few state economists and budget analysts have calculated the fiscal impact of the pandemic so far, and it’s hard at this early stage to say how big the drop off in tax collections will be, said Brian Sigritz, director of state fiscal studies for the National Association of State Budget Officers, a Washington, D.C.-based membership organization.

But the early estimates don’t look good, he said. “It looks like the drop-off that states could be facing this time could be more severe than the Great Recession.”

State officials all over the country are planning for revenue declines. Hawaii officials have estimated a million decline; in New York, it’s a whopping billion. West Virginia is losing $9 million a week from its closed casinos alone.

The governors of New Jersey, Ohio and Pennsylvania already have announced limited spending and hiring freezes. California Gov. Gavin Newsom, a Democrat, and Ohio Gov. Mike DeWine, a Republican, have warned state agencies to expect budget cuts. 

New York Gov. Andrew Cuomo, a Democrat, said in a radio interview last week that lawmakers may need to cut education funding in order to address the state’s budget hole. 

“I said kiddingly to a legislator before, I said, ‘This is the easiest budget we’ve done. There’s no option. The number is zero,’” Cuomo said. “We have no money.”

The members of Colorado’s Joint Budget Committee haven’t been able to meet in person to discuss the changing revenue picture yet, said Rep. Daneya Esgar, a Democrat who chairs the committee.

But Esgar said she’s already asking lawmakers to review what their measures will cost. “I think it’s optimistic to think that any new program be funded at this point,” she said. 

The $150 billion the federal government has approved in coronavirus relief for states and cities could help stabilize their budgets, Sigritz said, although its impact remains to be seen. “It’s less than some governors had hoped for, but it will help states address some of the increased spending demands.”

The budget outlook has worsened for states as it’s become clear that social distancing restrictions will need to be in place for months, not weeks, to prevent hospitals from becoming overwhelmed with coronavirus patients. 

After initially saying he’d like to lift social distancing guidelines by Easter, President Donald Trump has extended them to April 30. Virginia Gov. Ralph Northam, a Democrat, this week issued a stay-at-home order that will be in effect until June 10. 

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Sophie Quinton

Sophie Quinton writes about fiscal and economic policy for Stateline. Previously, she wrote for National Journal.