State Rundown 4/22: Earth Day Lessons from Pangea to Pandemic

In different ways, Earth Day and the COVID-19 pandemic convey a similar lesson: people around the world face shared struggles and disparate impacts, which they must work together to overcome through both emergency action and systemic change. In keeping with that lesson, state fiscal policy news this week was strikingly similar around the country, as states take account of the major threat posed by the pandemic to their budgets and attempt to grapple with its disproportionate impacts on communities of color and low-income families.

Recommended Reading on State Responses to COVID-19 Pandemic

• The Chicago Tribune and New York Times each report on the fiscal bind rapidly tightening on state budgets.
• The New York Times explains why COVID-19 is a civil rights issue and how civil rights activists continue to virtually push for targeted legislation, investments, and accountability. Governing demonstrates that government has a major role to play in addressing racial inequities amid the pandemic.
• Stateline notes that joblessness is approaching 25 percent in some states, and Route Fifty focuses on the areas likely to see the worst impacts.
• Bloomberg reports on the $500 billion in federal aid requested by states and the difficulties states face in updating their sales tax codes.
• The New York Times makes the case for funding federal coronavirus relief through a one-time tax on the wealthy to ensure that new taxes only fall of those who can afford them.
• Counties are getting short shrift in federal aid so far, according to reporting from Route Fifty.

State Roundup

• Oil prices hit a historical low this week, with prices falling into the negatives. This crash impacts a number of oil rich states, including ALASKA which relies heavily on oil revenue to fund their state budget.
• The ARKANSAS legislature passed a scaled-down version of their $5.8 billion budget, which includes tapping into their rainy day fund for $3.4 million. An Arkansas Municipal League poll of local government leaders found that they are anticipating an average revenue shortfall of 26.5% through the end of the calendar year.
• Pandemic-related revenue loss estimates at the state and local level in CALIFORNIA are staggering: the state could see a 20 percent decline in tax collections and a resulting $35 billion budget shortfall. Los Angeles County foresees a $1 billion drop in sales taxes alone, and Los Angeles City is estimating a $231 million shortfall this fiscal year and $598 million the following year.
• An audit report out of COLORADO found the city of Denver’s methods for auditing marijuana businesses to be lacking and ineffective and noted that it has likely cost the city a significant amount in missed tax revenue.
• In the short term, CONNECTICUT is planning to cover its projected $530 million revenue shortfall for the current year by drawing down Rainy Day Fund savings.
• DELAWARE’s revenue estimators have reduced their projection for this year by $416 million, or 9 percent, and for next fiscal year by 6 percent, numbers that could grow to more than 10 percent.
• In the DISTRICT OF COLUMBIA, a coalition of large businesses and developers called “DC2021” are lobbying for nearly $1 billion worth of tax breaks.
• FLORIDA adopted a $93.2 billion spending plan for the upcoming fiscal year, but a new analysis predicts that the state may need to make further budget cuts.
• GEORGIA could face a $3-4 billion budget shortfall in the coming year, according to the Georgia Budget & Policy Institute. Gov. Brian Kemp made the controversial and risky decision to reopen certain businesses on Friday to restart the state’s economy.
• Along with GEORGIA Gov. Brian Kemp, governors across the Southeast including FLORIDA, SOUTH CAROLINA, TENNESSEE, ALABAMA, and MISSISSIPPI formed a coalition to discuss reopening businesses.
• With tourism at a standstill, HAWAII is preparing for the possibility of a $1.5 billion revenue shortfall. Deep state budget cuts and pay cuts for state workers are among the solutions under exploration.
• Researchers from Ball State University in INDIANA released a study finding that business closures due to the coronavirus outbreak could cost local governments over $200 million in tax revenue.
• IOWA lawmakers have no budget in place for the coming fiscal year, but could remain in recess and rely on a contingency plan allowing the state to carry on operations for the first two months of the fiscal year (July and August) without a budget in place.
• An official forecast in KANSAS found that the state will collect $1.2 billion less over the next few fiscal years. In the coming fiscal year, the legislature expects to confront a $633 million shortfall with projections currently 10.6% lower than the previous projection in November.
• The drop in oil prices could lead to a $20 million loss per month to LOUISIANA‘s budget. Taxes and royalties from oil and gas production bring in approximately $750 million annually.
• Moody’s Analytics estimates that MAINE could see a $200 million shortfall by the end of June and up to a $1 billion revenue shortfall by the middle of next year. Maine is expected to meet to adjust their official revenue forecast in a few months.
• MASSACHUSETTS lawmakers continue to weigh emergency measures. The Massachusetts Budget and Policy Center released a brief that provides options to support individuals and families in the Commonwealth where federal cash assistance falls short.
• The MINNESOTA Department of Revenue announced that it will not impose nexus for business taxes on companies whose employees are working remotely from Minnesota due to COVID-19; NORTH DAKOTA recently made the same clarification.
• MISSOURI lawmakers will return to session next week, which could allow them to enact needed changes like finally requiring sales tax collections on online purchases, but some warn is happening too soon and for the wrong reasons.
• NEBRASKA’s capital city newspaper opines that it’s time to start tax policy discussions afresh once again, this time with broader community input and a recognition that addressing property tax and school funding issues requires “rebalancing property taxes with sales and income taxes.” This is particularly true considering that federal aid is unlikely to fully meet state needs.
• Clark County, NEVADA (home of Las Vegas), is anticipating a open to borrowing billions to help get the state through the pandemic via a federal bond program.
• After the Board of Equalization declared a revenue failure, OKLAHOMA will now be able to dip into an additional $302 million authorized under a recent budget stabilization bill.
• Despite talk of suspending implementation of OREGON’s new corporate activities tax, Gov. Kate Brown says the state will go forward with it.
• PUERTO RICO Gov. Wanda Vázquez Garced signed a bill amending a major tax reform plan, which includes a 3 percent tax cut for taxpayers whose incomes do not exceed $100,000 and the elimination of tax on business-to-business transactions.
• This week’s plunge in oil prices could dramatically hurt the TEXAS economy since taxes on oil and gas make up a significant part of the state’s general revenue. City and county officials technically have the authority to raise revenue by raising property taxes in the wake of a disaster, but this is controversial among Texans. Just last year, Texans passed a constitutional amendment that makes imposing an income tax virtually impossible, further dwindling Texas’s options for raising revenue.
• UTAH lawmakers will consider making changes to a bill that would have trimmed a sales tax exemption for purchases of locomotive fuel when they meet for an upcoming special session.
• Lawmakers in VERMONT are working to strike a delicate balance. Legislation under consideration would give municipalities the authority to delay property tax deadlines this year. However, revenues from property taxes are supporting the education fund which is predicted to face a $40 million deficit by the years’ end.
• WEST VIRGINIA Department of Revenue officials estimate that the state will end the fiscal year with a $376 million deficit or greater. Gov. Jim Justice has resisted calls to tap into rainy day funds or take other measures because he’s banking on federal aid to plug budget gaps.

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