'Unprecedented': States face hundreds of billions in lost revenue
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May 17, 2020, 6:20 PM +07 / Updated May 18, 2020, 12:40 AM +07
By Allan Smith
The coronavirus pandemic will cost states hundreds of billions of dollars in revenue in the upcoming fiscal year, according to an NBC News survey of 33 states and Washington, D.C.
With most states starting their new fiscal year early this summer, the projections in many cases will serve as the basis for severe budget cuts states may have to make if massive federal government aid doesn't come soon. Though, the nature of the crisis makes forecasting the future incredibly difficult, officials said.
Every state that responded to the NBC News survey reported it faces a revenue loss — that includes large states and small across the country, some red and others blue — although not every one said it'd be forced to make budget cuts soon.
"This is an unprecedented occurrence in American history and arguably world history, at least in modern history," said Louisiana Commissioner of Administration Jay Dardenne. "So there's no playbook. There's nothing to look at. And there's nothing to benchmark for this."
NBC News reached out to the top budget officials in all 50 states asking how much revenue they were projecting would be lost as a result of the coronavirus outbreak, what kind of budget shortfall they are facing and what, if any, cuts will be necessary.
Twenty-five states and Washington, D.C., responded with either initial totals for how much they've lost, projections for the upcoming fiscal year or budget cuts they are considering. Eight states did not respond but have since released that information publicly. The remaining 16 states either did not respond or have not released such information publicly, though officials in some of those states have openly discussed facing revenue shortfalls in the billions.
The revenue declines reach every aspect of states' sources for spending money. New York is projecting its biggest dip will come from a nearly $12 billion hit to sales and use taxes. In Alaska and Oklahoma, the collapsing oil prices are projected to take a huge toll, while in Arizona, individual income taxes are projected to be at the heart of the state's losses.
Dardenne told NBC News that trying model expected losses is an almost "impossible chore" and noted that two of his states' top economists acknowledged their initial projections of $1 billion in lost revenue may need to be revised in a big way later this year.
Virginia Secretary of Finance Aubrey Layne, whose state is projecting $3 billion in losses through fiscal year 2022, will be re-forecasting in the coming weeks. No economist, he said, has a crystal ball for this crisis.
"Models are most accurate when describing how the economy and revenues normally behave," Mark Quasney, a South Dakota state economist, told NBC News. "This is not a normal time, so estimates are highly unreliable and volatile."
The initial projections show eye-popping results. Earlier this month, California projected a dip of more than $41 billion in revenue through fiscal year 2021 with a budget deficit of about $54.3 billion — nearly three times the size of its rainy day fund. Though, that hole is smaller, percentage-wise, than deficits California faced in 2003 and 2009, which the state attributed to "prudent fiscal management and strong economic recovery since 2011."
California Gov. Gavin Newsom, a Democrat, told CNN's "State of the Union" on Sunday that "none" of the budget issues his state is facing is a result of any pre-existing financial conditions.
"We're not looking for charity, we're not looking for handouts," Newsom said, adding that states "are facing unprecedented budgetary stress. It is incumbent upon the federal government to help support these states through this difficult time."
Newsom added the funding is "not a red issue or a blue issue."
"This is impacting every state in America," he said.
In New York, the state the coronavirus outbreak hit hardest, more than $31 billion in lost revenue is projected by the end of the next fiscal year. Over the next four years, the state projects that total to hit about $61 billion.
Already, New York has planned to cut about $10 billion in spending as Gov. Andrew Cuomo, a Democrat, said his state needs the ...