covid-19 economics continuing to challenge state budgets, says study

Fewer road, bridge, and school construction projects are expected to be authorized in the next fiscal year as states across the country try to balance their budgets in the wake of the COVID-19 economic shutdown.

According to a new study compiled by the National Association of State Budget Officers, state leaders have been forced to not only adjust their 2021 fiscal budgets downward, but are continuing to grapple with a host of uncertainties clouding budget forecasts well into next year.

The study, State Fiscal Outlook: Pre & Post Covid-19, notes that in trying to get a handle on how long the pandemic lasts, some states have decided to put forward temporary budgets for the coming year.

Other states that enacted spending plans before the effects of COVID-19 expect to convene special sessions in the weeks ahead in order to “adjust those spending plans in response to revenue declines.”

In anticipating a future loss of revenue, some governors have directed agencies within their states to reduce their own budgets by as much as 15 or 20 percent.

But those cuts also present new challenges, says the NASBO study: “Cuts at those levels would be devastating to essential services, at a time when demand for such service is on the rise due to the public health crisis and economic downturn.”

Noting that many states endured drastic revenue declines during the Great Recession with the help of support from Washington, the NASBO study continues: “Additional federal aid to states will be necessary to avoid more drastic and painful cuts to essential services that will hurt state residents and significantly dampen the nation’s economic recovery.”

The NASBO study parallels a survey released in late June by the National League of Cities showing that some 65 percent of the municipalities were planning to cancel road, bridge, building and water systems.
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Some of the city leaders surveyed in the NLC study said the projects were canceled on a temporary basis, with the hope that a weakened COVID-19 later this year will lead to a return to economic activity and increased revenues.

By Garry Boulard

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