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Logo for Special Series: State Budget Watch

States Grappling With Hit to Tax Collections

October 5, 2020

"State revenues are declining precipitously and costs are rising sharply, with many businesses closed and tens of millions of people newly unemployed."

COVID-19 has triggered a severe state budget crisis. While the full magnitude of this crisis continues to unfold, state revenues are declining precipitously and costs are rising sharply, with many businesses closed or operating at reduced hours and millions of people recently unemployed. Due to the economy’s rapid decline and uncertainty about its future path as well as possible federal aid, official state revenue projections likely do not yet fully reflect the unprecedented fiscal impact of the coronavirus pandemic. Executive and legislative fiscal offices in many states are analyzing new economic projections and producing initial estimates of the damage before state legislatures meet in regular or special sessions to address shortfalls. Most states have released estimates but they may change before state legislatures meet again later this year or in January. (See Table 1.)

Estimates Show Substantial Shortfalls for 2020, 2021

States’ initial revenue projections give a first look at some of the damage the pandemic-induced downturn is causing to state budgets, though they do not show states’ increased costs from fighting the virus and from rising demand for state services. The wide range of projected revenue impacts reflects the uncertainty that states face, and the variety of methods states are using to begin to assess the damage. (In some cases, states are still relying on data available before the crisis.)

Most states have begun the fiscal year that will extend through June 2021. State revenue estimators are likely proceeding cautiously with these initial estimates because of the consequences the revenue declines will have as states work to balance their budgets. Policymakers will want to be more certain about the scale of expected revenue drops before making large and harmful budget cuts. There is considerable uncertainty about the course of the economy over the next year. For example, if the federal government fails to provide additional fiscal stimulus, the chance that the economy could turn down again rises and a resurgence of the virus would dampen growth. In addition, gas taxes, vehicle registration fees, and other revenues that are deposited into separate funds (like transportation funds) are also declining.

States faced an immediate crisis in fiscal year 2020 as the pandemic took a toll on revenues. State tax collections for March through July 2020 were 7.5 percent less than in the same months of 2019. In normal times, tax collections would have grown from 2 to 3 percent. To balance their budgets — as required — states made cuts, tapped reserves, or found enough revenue to close these shortfalls in just three months, an extremely short period to find such large amounts of revenue. The federal fiscal aid provided so far and the fact that high-wage earners were more likely to keep their jobs than low-wage workers, combined with the stock market remaining at high levels, has meant that revenues did not fall quite as much as anticipated in some states. But states still face large budget shortfalls and uncertainty as COVID-19 cases continue to climb and much federal assistance to workers and businesses has ended and may not be extended.

State estimates show that revenues for the current fiscal year, which began on July 1 for most states, could fall as much as or more than they did in the worst year of the Great Recession and remain depressed in following years. New York and Colorado, for example, project revenue drops of 17 percent or more if the recession is deep.

  • California expects revenues to decline by $32 billion in 2021 alone, according to the Department of Finance. The projected revenue declines in fiscal years 2020 and 2021 at the time the 2021 budget was adopted, combined with COVID-19 costs and increased need for other state services, far outstripped the balance in the state’s substantial rainy day fund.
  • New York’s tax revenues will fall by $13 billion in 2021 and by $16 billion in 2022, according to the state’s Division of Budget.
  • Colorado’s revenues could drop by as much as $2.6 billion in 2021 and $1.7 billion in 2022, according to the Legislative Council.

Another group of states face a double threat. States with a high concentration of oil-related industries are seeing a decline in economic activity and tax collections due to plunging oil prices on top of COVID-19-related effects and the recession. For example, Alaska is projecting an $882 million decline in revenues in the current fiscal year, and New Mexico could see a $2 billion drop.

States are drawing on their rainy day funds and other budget reserves to address these shortfalls but, as in the last recession, those reserves will be far from adequate. And states will worsen the recession if they respond to this fiscal crisis by laying off employees, scaling back government contracts for businesses, and cutting public services and other forms of spending.

Damaging cuts have already begun. In Georgia, policymakers approved a 10 percent cut for 2021, including a nearly $1 billion cut for K-12 public schools and cuts to programs for children and adults with developmental disabilities, among others. Maryland enacted $413 million in emergency spending cuts including large cuts to colleges and universities. Florida’s governor vetoed $1 billion in spending that lawmakers approved before the crisis and ordered agencies to look for 8.5 percent more in possible cuts for fiscal year 2021. The state also cut money for community colleges and services related to behavioral health, including opioid and other substance use treatment services, crisis intervention services, and services for people experiencing homelessness.

Given the economy’s rapid decline and the extraordinary damage being done to state, Tribal, and local budgets, federal policymakers will need to provide more help to states and families affected by the crisis.

Tracking Estimated State Revenue Shortfalls

We’ve collected the preliminary estimated revenue declines we’re aware of in the table below. We’ll update this list as states continue to revise their revenue estimates for the upcoming fiscal year. In all cases these are preliminary estimates that will be updated as more is known about the impact of the COVID-19 pandemic on the economy and tax collections.

COVID-19 Pandemic Expected to Cause Sharp Revenue Drops in States
Preliminary Estimates of Declines in General Fund Tax Revenues
State Fiscal Year Decline Decline as percent of pre-COVID-19 revenue projections
Alaska 2020 $612 million 10 percent
Alaska 2021 $882 million 15 percent
Alaska 2022 $797 million 14 percent
Arizona 2020 $864 million 8 percent
Arizona 2021 $873 million 7 percent
Arizona 2022 $663 million 5 percent
Arkansas 2020 $113 million 2 percent
Arkansas 2021 $206 million 3 percent
California 2020 $9.7 billion 7 percent
California 2021 $26–$32.2 billion 17–21 percent
Colorado 2020 $968 million 7 percent
Colorado 2021 $2.6 billion 20 percent
Colorado 2022 $1.7 billion 12 percent
Connecticut 2020 $361 million 2 percent
Connecticut* 2021 $2.6 billion 13 percent
Connecticut 2022 $2.3 billion 12 percent
Delaware 2020 $246 million 5 percent
Delaware 2021 $283 million 6 percent
Delaware 2022 $396 million 8 percent
Florida 2020 $1.9 billion 6 percent
Florida 2021 $3.4 billion 10 percent
Florida 2022 $2 billion 6 percent
Georgia* 2021 $2.5 billion 9 percent
Hawaiʻi 2020 $792 million 11 percent
Hawaiʻi 2021 $1.8 billion 23 percent
Hawaiʻi 2022 $1.5 billion 19 percent
Idaho 2021 $37 million 1 percent
Illinois 2020 $2.7 billion 7 percent
Illinois 2021 $4.6 billion 12 percent
Indiana 2020 $1.4 billion 8 percent
Indiana* 2021 $2.0 billion 12 percent
Iowa 2020 $150 million 2 percent
Iowa 2021 $360 million 4 percent
Kansas 2020 $816 million 11 percent
Kansas 2021 $549 million 7 percent
Kentucky 2020 $10 million 0 percent
Kentucky 2021 $361–$659 million 3–6 percent
Louisiana 2020 $293 million 3 percent
Louisiana 2021 $970 million 10 percent
Maine 2020 $28 million 1 percent
Maine 2021 $528 million 13 percent
Maine 2022 $434 million 10 percent
Maryland 2021 $673 million 3 percent
Maryland 2022 $311 million 2 percent
Massachusetts 2020 $2.4–$3 billion 8–10 percent
Massachusetts 2021 $2.8–$9.6 billion 9- 31 percent
Michigan 2020 $926 million 4 percent
Michigan 2021 $2.5 billion 10 percent
Michigan 2022 $1,7 billion 7 percent
Minnesota 2020 $610 million 3 percent
Minnesota 2021 $3 billion 12 percent
Minnesota 2022 $2.5 billion 10 percent
Mississippi 2020 $344 million 6 percent
Mississippi 2021 $275 million 5 percent
Missouri 2020 $864 million 9 percent
Missouri 2021 $1 billion 10 percent
Montana* 2021 $380 million 15 percent
Nebraska 2020 $269 million 5 percent
Nebraska 2021 $50 million 1 percent
Nebraska 2022 $396 million 7 percent
Nevada 2020 $509 million 12 percent
Nevada 2021 $1.2 billion 26 percent
New Hampshire 2020 $125–$199 million 5–8 percent
New Hampshire 2021 $229–$395 million 9–15 percent
New Jersey 2020 $2.8 billion 7 percent
New Jersey 2021 $7.3 billion 18 percent
New Mexico 2021 $598 million - $1.5 billion 8 - 19 percent
New Mexico 2022 $ 287 million - $1.1 billion 4- 14 percent
New York* 2021 $13.3 billion 15 percent
New York* 2022 $16 billion 17 percent
North Carolina 2020 $1.6 billion 7 percent
North Carolina 2021 $2.6 billion 10 percent
Ohio 2021 $2.3 billion 9 percent
Oklahoma 2020 $447 million 7 percent
Oklahoma 2021 $1.4 billion 16 percent
Oregon 2022 $1.1 billion 9 percent
Pennsylvania 2020 $3.5 billion 10 percent
Pennsylvania 2021 $1.2 billion 3 percent
Puerto Rico 2020 $800 million–$1.1 billion 8–11 percent
Rhode Island 2020 $281 million 7 percent
Rhode Island 2021 $516 million 12 percent
South Carolina 2020 $105 million 1 percent
South Carolina 2021 $754 million 7 percent
Tennessee 2020 $654 million 5 percent
Tennessee 2021 $1.4 billion 10 percent
Texas 2020 $4.4 billion 8 percent
Texas 2021 $8.8 billion 15 percent
Utah 2020 $93 million 1 percent
Utah 2021 $757 million 9 percent
Vermont 2021 $182 million 11 percent
Vermont 2022 $104 million 6 percent
Virginia 2020 $234 million 1 percent
Virginia 2021 $1.3 billion 6 percent
Virginia 2022 $1.4 billion 6 percent
Washington 2020 $1.1 billion 4 percent
Washington 2021 $3.4 billion 13 percent
Washington 2022 $2.3 billion 8 percent
Washington, D.C.* 2020 $500million 6 percent
Washington, D.C.* 2021 $985 million 11 percent
Washington, D.C.* 2022 $815 million 9 percent
West Virginia 2020 $500 million 11 percent
Wisconsin* 2021 $2 billion 10 percent
Wyoming 2020 $109 million 9 percent
Wyoming 2021 $236 million 21 percent
Wyoming 2022 $213 million 19 percent

* See Notes in Table 2

Sources and Notes
State Source Date and Source Notes
Alaska Department of Revenue April 6  
Arizona Joint Legislative Budget Committee June 19  
Arkansas Department of Finance and Administration April 2 & July 2  
California Department of Finance May 7  
Colorado Legislative Council May 12  
Connecticut Office of Policy and Management August 17 OPM presentation to the Appropriation Committee informational hearing. FY21 estimate is preliminary
Delaware Economic and Financial Advisory Council June 20  
Florida Office of Economic & Demographic Analysis/Revenue Estimating Conference July / August 14  
Georgia Office of Planning June 30 Based on (unposted) communication with Governor’s Budget Office
Hawaiʻi Council on Revenues September 17  
Illinois Office of Management and Budget April 15  
Idaho Division of Financial Management August 1  
Indiana State Budget Committee June 19 and July 1 FY21 based on news report
Iowa Revenue Estimating Conference May 29  
Kansas Consensus Revenue Estimating Group April 20  
Kentucky Governor’s Office of Economic Analysis August 27  
Louisiana Revenue Estimating Conference May 11  
Maine Revenue Forecasting Committee August 1  
Maryland Board of Revenue Estimates September 30  
Massachusetts Federal Reserve Bank of Boston July 9  
Michigan Consensus Revenue Agreement August 24  
Minnesota Management and Budget August 3  
Mississippi State Economist June 15  
Missouri Office of Administration/Governor, press report July 3 /April 18  
Montana Legislative Fiscal Division June 23 FY20 estimate is unchanged from pre-COVID estimate
Nebraska Legislature August 13  
Nevada Economic Forum/Governor June 10/July 6  
New Hampshire House Ways and Means Committee June 1  
New Jersey Treasury May 14  
New Mexico Consensus Revenue Estimating Group Sept 30  
New York Division of Budget April 7 Estimate for all funds (general fund plus other state funds)
North Carolina Fiscal Research Division May 22  
Ohio Office of Budget and Management June 10  
Oklahoma Board of Equalization April 20  
Oregon Office of Economic Analysis September 20  
Pennsylvania Independent Fiscal Office June 22  
Puerto Rico Financial Oversight and Management Board August 5 The two FY20 figures reflect reporting discrepancies between the Treasury Department and the federally-mandated Oversight Board. (Details in linked document.)
Rhode Island Revenue Estimating Conference May 8  
South Carolina Board of Economic Advisors August 31  
Tennessee Department of Finance and Administration June 3  
Texas Comptroller July 20  
Utah Appropriations Committee June 17  
Vermont Joint Fiscal Office August 12  
Virginia Secretary of Finance August 18  
Washington Economic and Revenue Forecast Council June 17  
Washington, D.C. Chief Financial Officer September 30 Revenue projections do not include tax increases in 2021 budget.
West Virginia Revenue Secretary April 13  
Wisconsin Governor April 15 Based on (unposted) April 15 letter from Gov. Tony Evers to President Trump
Wyoming Consensus Revenue Estimating Group May 26