Why some states see rosier forecast
Recession hits low-wage workers, ‘weird situation for everyone else.’
As Congress has spent the last few weeks debating aid to state and local governments, a number of states have announced surprising news: Their finances no longer look quite as bad as they had feared in the uncertain early days of the pandemic.
States are still broadly hurting fromthe economic crisis. But California expects a one-time windfall this fiscal year. Wisconsin said it might still be able to sock away somerevenue inits rainydayfund. Marylandnudgedup its projected revenues, for the second time this fall. And Minnesota forecasts a surplus.
This good news reflects in part the dire economic expectations of sixmonthsago; evenmodestnumberslookgoodnowcomparedwith the worst fears written into state budgets in the spring. And state officials say they’ll still need federal help as they expect the pandemic’s effects todragonfor years andbatter local governments. Federal help, after all, is part ofwhat has buoyed them so far.
The states with rosier forecasts alsocomplicatethepoliticalfightin Washington over state aid, which has held up agreement on a yearend stimulus deal. Republicans have characterized state aid as a bailout for profligate blue states. But many states that are looking better nowhave among the most progressive tax structures in the country, and that is part of what has rescued them this year.
This recession, distinct from many before it, has piled itsworst effects on low-wageworkers. That means that state budgets that rely the most on wealthier residents to fund government haven’t been hurt asmuch by an economic crisis that has left thewell-off largely unscathed.
“We have a recession for lowwage earners, and we have just a weird situation for everyone else,” said Peter Franchot, the comptroller forMaryland, which announced last week a $64 million increase in estimated revenues this budget year, compared with September estimates (which were up $1.4 billion from May).
Forecasters and state officials say they didn’t expect this back in May and June when they drafted budgets imagining a severe downturn that might lookmore like the Great Recession — with broad layoffs among manufacturingworkers, with a slumping stock market, with economic pain spreading into white-collar offices and middle-class subdivisions.
In California, which has a progressive income tax, state revenues collected this year through Octoberweredownonlymodestly from that same timeline in 2019.