The COVID-19 Pandemic Is Crushing State Budgets. A Federal Bailout Is Still a Bad Idea.
When it became clear that the COVID-19 pandemic was going to wreck the state’s tax revenue, lawmakers in Utah got out their scissors.
In June, the state legislature made more than $1 billion in emergency budget cuts, slashing spending across more than 100 line items in the state’s education and general funds. State Senate President Stuart Adams (R–Layton) told The Salt Lake Tribune that the cuts were necessary as part of “short- and long-term decisions that will sustain the state today while we deal with the uncertainties of tomorrow.” A month later, it appears that quick action and a willingness to make tough decisions may have spared Utah from the kind of severe budget shortfall other states are now facing. The Tribune reported last week that Utah’s tax revenue doesn’t seem to be declining as sharply as was initially feared.
It probably helped that Utah had been preparing for a situation like this.
Once every three years, Utah is required by state law to conduct a budgetary stress test. While other states have similar requirements, Utah’s is one of the most thorough in the country, according to Jeff Chapman, the director of the state fiscal health project for the Pew Charitable Trusts, a nonprofit that encourages states to adopt more sound budgetary practices.
“The exercise helped state leaders prepare for the expected budgetary distress in two ways: First, it gave policymakers a head start in considering which tools they could use to close the gaps,” Chapman writes. “Second, Utah had a model in place for analyzing the quickly changing fiscal outlook.”
COVID-19 was an unexpected and unprecedented challenge for state and federal policymakers. But even an economic downturn as severe as the one caused by this pandemic fell within the parameters of Utah’s most recent economic stress test. When it hit, the state’s Legislative Fiscal Analyst projected a drop in tax revenue of between $1.7 billion and $4.6 billion over
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