States Are in a Quandary as Taxes Evaporate and Virus Spending Soars

The governors of seven Northeastern states, including New York, said this week that they would coordinate efforts to reopen their economies as the rate of daily infections dropped; the governors of three West Coast states made a similar pact. The governors have been reacting to President Trump’s statements on Monday that he had the ultimate power to decide when to relax stay-at-home orders and other restrictions that states have ordered to slow the spread of the virus.

Last week, the National Governors Association called on Congress to provide additional fiscal assistance to states to meet budget shortfalls arising from the crisis. “In the absence of unrestricted fiscal support of at least $500 billion from the federal government, states will have to confront the prospect of significant reductions to critically important services all across this country, hampering public health, the economic recovery, and — in turn — our collective effort to get people back to work,” the association’s chairman, Gov. Larry Hogan of Maryland, and vice chairman, Mr. Cuomo, said in a statement.

No two states are being affected the same way. Some of the most drastic tax revenue losses have occurred in states like Texas, Oklahoma, Alaska and Louisiana, which rely heavily on taxing oil and gas. Oklahoma based its initial budget projections on $55-a-barrel oil; lately, the price has been less than half that. The Texas Taxpayers and Research Association estimates that for every dollar decline in the price of oil, the state loses $85 million in revenue.

“The things we thought would keep us from hitting the edge of the fiscal cliff — oil prices rebounding, production coming up dramatically — those prospects look awfully dim right now,” Pat Pitney, the Alaska Legislature’s chief budget analyst, who was budget director to former Gov. Bill Walker, recently told the Alaska Public Media news site. “None of us knows the future. But the signs are way less optimistic than they were just a few short months ago.”

Other states, like Hawaii, Nevada, New York and New Jersey, depend heavily on bringing in huge numbers of people — sun worshipers, theatergoers, gamblers, conventioneers, sports fans — and taxing their hotel rooms, tickets, restaurant meals and alcohol.

Article source: https://www.nytimes.com/2020/04/15/business/economy/state-tax-revenue-debt-coronavirus.html