State Budgets: Course Correction Not Crisis

Chris EdwardsMedia reports since the pandemic began have claimed that state and local governments are in a “dire fiscal crisis” and face “the biggest cash crisis since the Great Depression. ” Such claims are exaggerated. State‐​local tax revenuesdipped in the second quarter of 2020 but bounced back strongly in the third quarter.Unfortunately, the media scare stories prompted Congress to passvastly more aid for state and local governments than was lost in small tax revenue declines. In December, Congress provided state and local governments $54 billion for schools, $14 billion for transit, $10 billion for highways, and billions in other aid. Now President Bidenwants to dish out another $350 billion to state and local governments. That is so excessive —it is just spending to show that he is “doing something,” but it is completely unneeded.The National Association of State Budget Officersreleased a  budget update in December. Across the 50 states, general fund spending rose 4.0 percent 2020 and is expected to dip 1.1 percent in 2021. The chart below shows that the dip comes after 10 years of robust spending growth. (These are state fiscal years).State general fund revenues were down 1.4 percent in 2020 and an expected 3.5 percent in 2021, but that is after strong increases of 6.9 percent in 2018 and 5.7 percent in 2019.Most states are having to tighten their belts, which is not a  bad thing. A course correction is needed, but there is no broad‐​based ...
Source: Cato-at-liberty - Category: American Health Authors: Source Type: blogs