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States face $500B shortfalls as Congress debates aid

States face $500B shortfalls as Congress debates aid

by Jay Heflin | Washington Examiner  |  Published on April 27, 2020

State and local governments face pandemic-induced revenue shortfalls that could total $500 billion, which could prompt aid from Congress or force cuts to programs and government employment for years to come.

The lack of funding comes as states face dwindling revenue streams. The shuttering of businesses means that state sales taxes are not being collected. The flood of job losses also means states are collecting less income tax as unemployment benefits rise. Several states have also postponed tax payment deadlines.

The scarcity of tax collections means that total state budget shortfalls could be the largest on record, according to the left-leaning Center on Budget and Policy Priorities. It projected a $105 billion shortfall in 2020, a $290 billion deficit in 2021, and a $105 billion shortage in 2022.

Meanwhile, all states, except Vermont, are required to maintain balanced budgets. With revenues projected to plummet, the states must either raise taxes, which is not a good idea during an economic crisis, or cut spending to balance their budgets, said Stan Veuger, an economist at the right-leaning American Enterprise Institute.

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