States are nearing shortfalls that could be the largest on record — totaling more than $500 billion in just over one fiscal year
AUGUSTA, Maine — While federal policymakers have provided a substantial amount of fiscal relief to state and local governments to combat the COVID-19 pandemic, Maine and other states need much more in order to avoid spending cuts that would harm families, destabilize communities and deepen the recession, according to a new report from the Center on Budget and Policy Priorities.
In the coming months, Maine’s revenues are expected to plummet. Meanwhile, health care, unemployment, and other costs related to the virus will soar and start to deplete state reserves that are inadequate to meet a uniquely severe economic crisis.
“Mainers are already losing their jobs and businesses, as they’re also fearing for their health and lives. The situation will worsen when our state revenues plummet and containment of the virus leads to a spike in public costs,” said Garrett Martin, executive director at the Maine Center for Economic Policy. “Absent swift and significantly more federal assistance, Maine could be forced to make dramatic spending cuts that hurt families, drive up inequality, and slow the broader economic recovery.”
Even after accounting for the federal fiscal aid (the CARES Act) and states’ rainy day funds, states still face shortfalls of as much as $360 billion, not including the substantial new costs they face to combat the COVID-19 virus. Similarly, the $8 billion set aside for tribes falls far short of the $20 billion that the National Congress of American Indians requested. After the Great Recession, states and localities made $290 billion in cuts that deepened racial and class inequities and slowed the recovery.
“The Medicaid increase and Coronavirus Relief Fund were important first steps, but they fall far short. States need more to respond to their worsening budget problems and protect their residents,” explained report coauthor Elizabeth McNichol, Senior Fellow at the Center on Budget and Policy Priorities. “This recession is projected to be considerably deeper than the last one. If states don’t get substantially more relief, they will balance their budgets with cuts that damage education, unemployment systems, infrastructure, and other critical public investments for years to come.”
In the next round of aid, federal lawmakers should provide additional Medicaid funding and/or other forms of fiscal relief to states, territories, and tribes by:
- Further increasing the federal government’s share of Medicaid payments (FMAP); this increase should adjust with economic conditions and remain in place as long as unemployment remains high.
- Providing additional fiscal relief through an extended and/or flexible Coronavirus Relief Fund or other means
- Providing some aid to local governments