New York and New Jersey, Hit Hard by Virus, Among Least Prepared Fiscally
New York and New Jersey, the states with the most confirmed cases, have rainy day funds and are among the smallest in the nation
(Bloomberg) --
As the coronavirus tips the U.S. into what may be the worst recession in decades, a troubling reality has emerged: Some of the hardest hit states were the least prepared for the economic fallout.
New York and New Jersey, the two states with the most confirmed cases, have rainy day funds that are among the smallest in the nation, according to data from the National Association of State Budget Officers.
The Empire State, which leads the U.S. with over 200,000 Covid-19 cases, has saved up a mere 3.2% of last year’s budgeted spending. New Jersey’s reserve sits at 1%, as does Pennsylvania, with the fifth-most cases. Bloomberg News reported Wednesday that New Jersey was pitching a borrowing plan to make up for billions of dollars in lost revenue. At the other end of the fiscal spectrum is oil-rich Wyoming, which has reported fewer than 300 infections. Its cushion equals 109% of expenditures, the most of any state.
States’ finances are already being stretched to the limit as millions of Americans are thrown out of their jobs. Illinois and Kansas, two of the most cash-strapped states, have seen claims for jobless benefits skyrocket. But it’s Pennsylvania that has suffered the deepest job losses.
The Keystone state ranked first in the nation after new unemployment claims soared to 13.5% in the last two weeks of March.
Pennsylvania’s unemployment trust fund also happens to be among the least well-funded. The state had just 11 weeks of insurance reserves left, based on the number of people claiming jobless benefits as of April 4, according to calculations made by the Tax Foundation. California was in the most precarious position with just 26 days remaining, while New York had only five weeks.
With the unprecedented public health crisis quickly overwhelming states and cities, some governors have called on the U.S. government to do more. In particular, New York’s Andrew Cuomo has called the amount of federal aid to states a “failure.”
He might have a point. The $2 trillion rescue package in the CARES Act provides $150 billion to states and local governments for the costs of responding to the virus, but it won’t cover budget gaps caused by a fall-off in tax revenue. (The Federal Reserve eased some pressure on states and the biggest local governments by agreeing last week to lend them $500 billion.)
Even with roughly $7.5 billion from the CARES Act going to New York, according to Tax Foundation estimates, Cuomo sounded downbeat about his state’s ability to procure enough kits to test all its residents.
“Where’s the funding for states to do this? ... I’m broke ... We have a $10 billion deficit,” he said in a news conference on Tuesday.
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