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The State & Local Fiscal Tsunami Rolls In, Drowning Front Line Governments in Red Ink

Writer's picture: Tom CochranTom Cochran

The Urban Institute's Tax Policy Center has just released its Monthly State Tax Revenue Highlights covering state revenue trends in the month of May 2020. The TPC brief State Tax Revenues Continued to Decline in May 2020” shows steep declines in state sales tax revenues in May.


Of the eighteen northeastern and midwestern states, only Maine hasn't turned some shade of red on TPC's latest map of fiscal distress.


From a macroeconomic stand-point, the fact that total state tax revenue has turned "sharply negative," underscores the Federal Reserve Chairman Jay Powell's increasingly blunt warnings that the state (and local) revenue shortfalls and their accompanying budget cuts can only lengthen what is now being characterized as either a "swoosh" or (my new favorite) a reverse square root shaped recovery. Whatever label we use for this slow recovery, we know that it will mean prolonged pain for the state and local sector.


The Tax Policy Center also now projects, based on 27 state budget forecasts, that


And let's not forget that the local government sector is experiencing its own case of dire fiscal distress as the Center for American Progress by Alan Cohen and Michael Madowitz summarized as eloquently as any observer in this May, 2020 report: https://www.americanprogress.org/issues/economy/news/2020/05/26/485396/need-direct-assistance-local-governments-response-coronavirus/



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