With states losing massive amounts of tax revenue while still having to support their residents during the coronavirus pandemic, the personal-finance website WalletHub recently released its report on the States That Need the Most Financial Help Due to COVID-19, as well as accompanying videos.
For the full report, visit: https://wallethub.com/edu/states-that-need-most-financial-help-due-to-covid-19/74485/
To identify which states may need the most financial help due to the coronavirus crisis, WalletHub compared the 50 states across 18 key metrics. Their data set ranges from the state’s rainy-day funds and debt per capita to the share of the workforce in highly-affected industries. Following are highlights from the report, along with a WalletHub Q&A.
Financial Need in California (1=Most, 25=Avg.):
45th – State Rainy-Day Funds per Capita
12th – Unfunded Pension Liabilities as Share of GSP
11th – State and Local Debt per Capita
47th – Unemployment Claims Increase Since the Beginning of the COVID-19 Pandemic
19th – GDP Generated by Highly Affected Industries as Share of Total State GDP
16th – State Preparedness for Severe Recession
Q&A with WalletHub
How are state budgets affected by the coronavirus pandemic?
“Many states are experiencing budget deficits because they have spent an extraordinary amount of money fighting the COVID-19 pandemic while taking in far less tax revenue than normal due to business closings. States with deficits have been forced to cut funds from less urgent areas to fill their immediate needs,” said Jill Gonzalez, WalletHub analyst. “It is crucial for the federal government to take the predicament of state budget shortfalls seriously so that vital services like education do not receive sharp cuts and we can minimize the severity of the unintended consequences stemming from our response to the pandemic.”
Should the federal government provide additional aid to states?
“The federal government should provide additional aid to states during the coronavirus crisis, as the $765 billion given so far through the CARES Act and other programs only comes out to around $2,300 per U.S. resident. Though more proposals for federal aid are in the pipeline, it may be a long time before Congress agrees on anything,” said Gonzalez. “The federal government should consider providing additional support not just to states but to individual citizens as well, since 84 percent of Americans would like another stimulus check, according to a recent WalletHub survey, and extra money in the hands of consumers would add some more liquidity into local economies.”
Why does Louisiana need the most financial help during the pandemic?
“Louisiana needs the most financial help during the coronavirus pandemic in part because the state’s rainy-day fund can’t sustain government operations for more than a few weeks, which leaves it unprepared to weather a budget crisis,” Gonzalez explained. “Louisiana has seen the fifth-lowest rebound in tax revenues since the Great Recession, and it is one of only six states where tax revenue has never exceeded pre-recession levels. Since Louisiana doesn’t have an adequate rainy-day fund or extra tax revenue to fall back on, it needs more support from the federal government.”
Why does Iowa need the least financial help during the COVID-19 pandemic?
“One major reason why Iowa needs the least financial help during the COVID-19 crisis is that it is among the states most prepared for a severe recession. Iowa’s financial reserves would be able to make up for a higher percentage of the shock from a recession than the reserves of all but nine other states,” said Gonzalez. “Industries that have been highly impacted by the COVID-19 pandemic – such as arts, entertainment, accommodation and food services – make up a very small portion of Iowa’s GDP, so the state has not been hit as hard by business closures as many other states, either.”