Deputy Director, State Policy Research
As COVID-19’s health and economic impacts intensify, creating huge state budget shortfalls, states and local governments are laying off workers and slashing support for schools and other services, harming working families — especially in communities of color — and delaying the economy’s recovery. These cuts will be just the tip of the iceberg if the federal government doesn’t provide more fiscal aid for states and localities.
State and local policymakers are waiting as long as they can to impose cuts, partly because they hope that the President and Congress will deliver more aid, and partly so they can get a better sense of the crisis’ magnitude. The economic collapse happened fast and some tax revenue isn’t due yet; most states delayed income tax filing deadlines to at least July 15 (to conform to the federal delay), with others also delaying deadlines for businesses to remit sales tax.
With business closures and layoffs sharply reducing states’ expected income and sales tax revenues, we estimate that state budget shortfalls will total about $615 billion over the current fiscal year (which ends June 30 in most states) and the next two. States must balance their budgets every year, even in recessions, setting the stage for layoffs and punishing cuts to essential services.
Many states are already heading down this path. In April and May alone, states and localities furloughed or laid off some 1.5 million workers, about twice as many as in the entire aftermath of the Great Recession of about a decade ago. Nearly half were school employees, as we’ve previously detailed, with essential health care workers also experiencing layoffs and workers of color likely disproportionately employed in the jobs being cut. Significant service cuts loom in the following states, with more likely to join them.
While many states are cutting programs, some also are forgoing planned investments. In Maryland, for instance, Gov. Larry Hogan cited the COVID-19 emergency in vetoing a sweeping, longstanding plan that would’ve targeted billions of dollars more each year to K-12 and higher education, in particular to programs designed to boost outcomes for students from low-income families and communities of color. Among the forgone investments was $580 million for Maryland’s historically black colleges and universities, which proponents touted as crucial to reversing decades of inequitable higher education funding.
Further cuts will hurt people and communities and make the recession much worse by causing more layoffs and taking more money out of people’s pockets. That will compound the harm to those whom the recession has most severely hit, such as low-wage workers and people of color. These cuts and their disproportionate harm to communities of color come at a time when so many Americans are demanding that we as a nation value every person’s humanity and enact policy that ensures that all communities, especially those that have been historically excluded, can access a more prosperous, equitable future.
Unless federal policymakers provide more help, states and localities will be forced to make even deeper cuts as they rewrite their budgets. Before that happens, federal policymakers should build on the state and local aid that the CARES Act provided, ideally by modeling their additional aid largely on what’s included in the House-passed Heroes Act.