[Charleston, WV] – While federal policymakers have provided a substantial amount of fiscal relief to state and local governments to combat the COVID-19 pandemic, West Virginia and other states will need much more in order to avoid spending cuts that would harm families, destabilize communities and deepen the recession, according to a new report from the Center on Budget and Policy Priorities. In the coming months, West Virginia’s revenues are expected to plummet – all while health, unemployment, and other costs related to the virus soar and begin to deplete the state’s limited reserves.
“West Virginians are already losing their jobs and businesses, as they’re also fearing for their health and lives. And the situation will worsen when our state and local revenues plummet and containment of the virus leads to a spike in public costs,” said Ted Boettner, executive director of the WV Center on Budget and Policy. “Absent swift and significantly more federal assistance, West Virginia’s state and local governments will be forced to make dramatic spending cuts that hurt families, drive up inequality, and slow the broader economic recovery.”
Just this week, West Virginia’s Revenue Secretary Dave Hardy estimated that the state could face a $500 million budget gap in this fiscal year, which ends on June 30. Additional revenue shortfalls can be expected into fiscal year 2021, due to the delayed impact of the pandemic on property tax and other revenues that make up state and local budgets. Nearly every type of revenue that the state relies on is in freefall including lottery revenues, sales taxes, and severance taxes.
The state’s debt obligations (e.g. Road to Prosperity) are also at risk. The wide-ranging impacts of this crisis on our state will be felt for months and years to come and, without more federal support, will seriously impact our ability to provide critical public services to residents.
Even after accounting for the federal fiscal aid (the CARES Act) and states’ rainy day funds, states still face shortfalls of as much as $360 billion, not including the substantial new costs they face to combat the COVID-19 virus. Similarly, the $8 billion set aside for tribes falls far short of the $20 billion that the National Congress of American Indians requested. After the Great Recession, states and localities made $290 billion in cuts that worsened racial and class inequities and slowed the recovery.
“The Medicaid increase and Coronavirus Relief Fund were important first steps, but they fall far short. States need more to respond to their worsening budget problems and protect their residents,” explained report coauthor Elizabeth McNichol, Senior Fellow at the Center on Budget and Policy Priorities.
“This recession is projected to be considerably deeper than the last one. If states don’t get substantially more relief, they will balance their budgets with cuts that damage education, unemployment systems, infrastructure, and other critical public investments for years to come.”
In the next round of aid, federal lawmakers should provide additional Medicaid funding and/or other forms of fiscal relief to states, territories, and tribes by:
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