What's Next
What Next?
Junious Ricardo Stanton
“While federal aid to state and local governments this year has exceeded
projected revenue losses, that aid is only one-time, and state and local
governments are expected to face shortfalls for many years. Without promises of
further aid, these governments are likely to cut spending now to prepare for
future imbalances. Furthermore, state and local governments are at the
forefront of the response to the pandemic in their communities and will likely
need to increase their typical spending to provide crucial public health
services and help communities adapt to social distancing guidelines.” How
much is COVID 19 hurting state and local revenues? Louise Sheiner and Sophia
Campbell Brookings Institute
The federal, state and local government’s responses to
COVID 19 have been disastrous. The unprecedented shut down of the economy, mandated
social isolation and quarantines of well people have wrought massive economic
collapse and psycho-social trauma. The incessant fear mongering by the
corporate and digital media have induced national hysteria, anxiety and
resentment. People now realize the
treatment is worse than the virus! The media is not telling us the recovery
rate is 96% and growing. https://www.worldometers.info/coronavirus/ and people
are angry.
The
government shut down, destroyed people’s businesses, ruined their lives caused
massive psychological damage and depression based upon exaggerated predictions
of infections and death! “A month later, it has become readily apparent
that the 2.2 million death projection was off by several orders of magnitude,
as was its
One of the unforeseen consequences of the government’s arbitrary and heavy handed policies has been the decline in revenue for state and local governments. These revenue shortfalls will severely impact the services states, counties and municipalities will be able to afford to offer and provide their residents. Governments depend on fees, a plethora of taxes, fines and leases for income. The lost of tax revenues will be staggering.
Many of the businesses that were
forced to close will not reopen thus leading to permanent drops in government revenue.
A Brookings report on government revenues made this projection, “We project that state and local government revenues
will decline $155 billion in 2020, $167 billion in 2021, and $145 billion in
2022—about 5.5 percent, 5.7 percent, and 4.7 percent, respectively—excluding
the declines in fees to hospitals and higher education. Including those fees to
hospitals and higher education would bring these totals to $188 billion, $189
billion, and $167 billion…State corporate tax collections make up only a
small part of state and local revenues but are particularly vulnerable to
economic downturns. We project that they will decline $2 billion in 2020, $29
billion in 2021, and $14 billion in 2022. Property taxes make up 22 percent of
own-source revenues (that is, excluding grants from the federal government),
but house prices have held up well so far and future declines in property taxes
do not appear to be significant. As people stay home, revenues collected from
sources like highway tolls and charges for public parks may fall.
Pandemic-related declines in charges and fees will likely account for a loss of
$82 billion this year, $55 billion next year, and $45 billion in 2022. These
declines disproportionately come from declines in transportation-related
revenues, a big difference from prior recessions. The pandemic could also lower
fees to public hospitals and institutions of higher education by $33 billion
this year, $22 billion in 2021, and $22 billion in 2022, although these fees
are typically rendered in exchange for services paid for by state and local
governments. For example, the sharp decline in health expenditures in the
spring meant that health care facility revenues plunged. To the extent that public
hospitals laid off workers, reduced hiring and hours, or cut back on supplies,
these revenue losses may have been offset at least in part by a decline in
spending.” How much is COVID 19 hurting state
and local revenues? Louise Sheiner and Sophia
Another potential problem is, governments may fall for
the okey-doke of the “Second Wave” and shut the economy again, exacerbating an
already tenuous budgetary situation. Unlike
the federal government, state and local governments are constitutionally
prohibited from running deficits. This will mean massive cuts in services or crippling
tax increases, how painful will these options be during a depressed economy
with high unemployment?
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posted by Junious Ricardo Stanton @ 8:27 AM
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