"Forewarned is forearmed." State government budgets will suffer severe strain, on both the revenue and expenditure sides of the ledger. A crisis looms.
First, revenue. State governments rely heavily on income and sales taxes. Crushing unemployment and "lockdowns" have crippled both. Unprecedented levels of unemployment combined with unprecedented declines in consumer spending will impose unprecedented contraction of government revenues.
What about expenditures? States bear primary responsibility for unemployment compensation and Medicaid. As the virus contracts revenue, then, it would expand expenditures, generating exploding deficits. But that cannot in fact happen because most states, including Illinois, have constitutional balanced budget requirements. Instead of expanding needed expenditures, then, states must contract them. What a terrible dilemma!
Local government budgets tell a similar story.
The picture just painted is sobering indeed. But remember that to be forewarned is to be forearmed. We must respond. If taxes are not to be raised, then spending cuts will be necessary. Balanced budget requirements will necessitate federal assistance. We should plan, prioritize, and make rational decisions. We can meet these challenges with a calm and careful response.
I am Bob Evans, and that is my perspective.
