Unexpected gains for some states
In his research, Peter DeGroot, JP Morgan’s head of municipal research and strategy, found a handful of states, including Idaho, South Dakota and New Mexico, that managed to raise even more money last year than in 2019. The survey also identified several states where tax revenues have not yet recovered because they rely heavily on tourism, oil and gas or coal mining – including Hawaii, Nevada, Florida, Texas and West Virginia.
Sheiner’s analysis showed that Idaho had the largest revenue recovery of any state. She conducted her research with Byron Lutz, an economist at the Federal Reserve.
Idaho Financial Management Division chief Alex J. Adams said in an interview that the recovery took authorities by surprise, and that they thought one of the reasons was the influx of new California residents, seeking to escape the high cost of that state of living – a trend that started before the pandemic, but accelerated last year. Adams also said that Idaho did not stop construction when the blockades occurred, which helped economic activity.
Republican Idaho Governor Brad Little said in his state of the state speech in January that the 2020 revenue collection was strong enough to send $ 295 million back to taxpayers, and still has enough to invest in. better highways, bridges and broadband access. He also wrote to the Idaho Congressional delegation last year, urging it to oppose the use of non-binding federal dollars to rescue poorly managed states.
With some states now “enjoying unexpected gains” and others still struggling, White said that a smaller amount of money, more carefully directed to the states that need it most, would be the most efficient approach for Congress. But getting assistance for governments that really need it, without sending unnecessary help to those who don’t, will require some “exceptional creativity,” he said.
Time played a role
To some extent, the states’ surprising recoveries reflect the timing of events in the past year. The pandemic started when many state legislators were reviewing initial budget proposals for the next fiscal year. The proposals, drawn up weeks before the shock, provide for a year of strong tax collection.
Then, in a matter of weeks, millions of people lost their jobs. State officials consider unemployment to be a powerful driver of their tax affairs; Research from previous recessions suggests that a single percentage point increase in the unemployment rate could generate $ 45 billion in state budget losses.