Tax revenues are falling for states and local governments across the country. The Atlantic wonders, “Will the coronavirus bankrupt cities?” Pew provides numerous examples of how state taxes are getting slammed:
Hawaii officials have estimated a $225 million decline; in New York, it’s a whopping $15 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.
And Bloomberg documents the effects on both state and local budgets.
Here in North Carolina, county and municipal governments have made their initial pitches to the General Assembly’s “continuity of operations,” and fiscal staff have explained the revenue impact of the federal CARES Act.
The state’s delay of income tax filing and payment deadlines to July means $2 billion in revenue will not be available this fiscal year. On the bright side, that is about how much the state had in unreserved fund balance at the end of February. But, the economic closure and massive unemployment will also put a bite on sales and income tax revenues through June and into the next fiscal year.
To keep spending at or below available money, state agencies are likely already putting together plans for how they can save hundreds of millions of dollars over the next three months and more starting in July. Savings like these are necessary to preserve as much of the $1.2 billion in the Savings Reserve until we can have a better picture of the health, economic, and social impacts of the pandemic.
Most of all it is hard to know what the lingering effects will be of the sudden stop of everything that once seemed normal.
