Congress could extend the recession if it doesn’t bail out the states.
by the Pew Charitable Trusts published last year, the slowness of the recovery meant that state tax revenues didn’t return to their pre-recession levels until 2013, adjusting for inflation — much longer than in the previous two recessions. Over this period, states lost an estimated $283 billion in tax revenue. “It was kind of like falling off a cliff and then walking up a ramp,” said, co-director of the Project on State and Local Government Finance at the University of Albany.
This meant that even by the time state revenues had recovered, it took longer for dollars to start flowing toward education or infrastructure. States didinto their rainy day funds, which they can draw on during emergencies, in case another recession hit. But that prudent instinct left them with even less cash to spend on other things. By 2018, according to Pew, nearly half of the states were still spending less money than they were a decade earlier.
And now, states are facing an even more devastating budget crisis. There is, of course, a huge amount of uncertainty about how long the COVID-19 pandemic will last, andthe process of reopening, which could bring lost tax money back into their coffers. But the long-term outlook still looks bleak.
That’s because in addition to a huge decline in tax revenue, states are facing new, unexpected costs.did provide money, including $150 billion from the CARES Act, for the states to use to offset spending in response to the coronavirus, as well as some additional money for Medicaid.
States are already facing hard choices about how to manage the giant holes in their budgets. California, for instance, is
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