States Emerging from Covid Year with Budgets Mostly Intact

Although many economists predicted that a year of the pandemic economy would spell ruin for many state budgets, a new report indicates that those states have proven to be remarkably resilient.

According to the Urban Brookings Tax Policy Center, most of the country’s states have seen their budgets increase in recent months and are otherwise in good shape.

The report shows Arizona’s budget as being up by 2.4%, with Colorado seeing a 5.7% increase, and New Mexico enjoying a 4.3% increase.

The Urban Brookings report found that overall total state revenues from April to December had decreased by only 1.8%, compared with the same period of time in 2019, when the national economy was booming.

“As it turns out, new data shows that a year after the pandemic wrought economic devastation around the country, forcing states to revise their revenue forecasts and prepare for the worst, for many the worst didn’t come,” notes the New York Times of the report.

That’s not to say that some state budgets haven’t suffered a hit. Alaska’s budget was off by a massive 42.5%, with North Dakota down by 14.8%, and North Carolina seeing an 11.8% decrease.

States in the Midwest were also generally on the down side, ranging from minus 0.9% in Ohio to 2.5% in Minnesota.

In response to a worsening economic situation, beginning by early last summer, many states laid off workers, cut spending, and relied on both federal aid and rainy day funds.

The Urban Brookings report also indicates that most states were considerably helped by the $600 weekly federal supplemental unemployment payments, making it possible for residents to still buy any number of grocery items and consumer goods.

That consumption, in turn, produced needed sales tax revenue for the states.

The report also claims that things were far worse at the state level during the Great Recession, when average budgets declined by anywhere from 6 to 8%.
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A separate report, also issued by the Urban Brookings center, says that some 31 states currently have enough in reserve to handle any continuing economic challenges brought on by the pandemic recession.

​By Garry Boulard

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