State economists shared some good news recently – and for a change – about the fiscal outlook of state government. Friday’s look back at general fund spring revenues showed a decline in revenue collections that was less dire than anticipated at the outset of the COVID-19 shutdown, which could add up to about $315 million more in state reserves as we begin this new fiscal year. Practically speaking, this means the state’s fiscal cushion is just a little thicker heading into what will still be a difficult legislative session in 2021 to balance state’s budget.
Chief economist for the Legislative Finance Committee Dawn Iglesias suggested the damage was mitigated by the spring’s $1,200 federal stimulus checks that boosted online sales even as in-state retail plummeted, as well as construction projects that have continued in spite of the pandemic.
Even so, the future is uncertain: state agencies anticipate 3-5% cuts to their budgets in January, and more difficult decisions may be needed if the federal government does not allow states to use CARES Act funding to backfill their budget. The spread of the virus, development and distribution of vaccines, and federal action are all significant unknowns that demand careful consideration.
Click here to read the full report by Dan McKay.
Click here to view the Revenue Stabilization & Tax Policy Committee presentation.
Click here to view the LFC’s most recent General Fund revenue tracking report.