United States | The pandemic and state finances

The state-budget train crash

Why this could cost lives and set back economic recovery

THE START of the fiscal year—July 1st in most states—is usually about as exciting as a 501(a) tax filing and as unpredictable as a Saudi weather forecast (sunny again!). Not this time. State tax revenues collapsed in April, falling on average by half, according to the Urban Institute, a think-tank. Demands on spending soared because the states are responsible for much of America’s spending on public health, unemployment and policing. By some calculations, state-budget deficits will reach a quarter of revenues in the coming fiscal year—or would do, if most states had not bound themselves by law to run balanced budgets. So instead of vast deficits, the states will have to make savage cuts to public services in the midst of a recession and pandemic. Through no fault of their own, their budgets are out of control and are about to hit the buffers.

This article appeared in the United States section of the print edition under the headline “The calamity ahead”

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