State Finances

February 26, 2021 • Volume 31, Issue 8
Will essential services need to be cut?
By Alan Greenblatt


Tax collections have fallen in almost every state due to the COVID-19 pandemic. The damage has not been as severe as initially predicted last spring, when some feared that states would face their worst financial straits since the Great Depression. A rising stock market and high-income earners' ability to work remotely have mitigated the cash crunch. Still, states that rely on industries such as tourism and oil extraction have been hit hard, and unemployment remains elevated in most states, creating greater demand for public services. States also face unexpected, pandemic-related expenses, such as vaccine distribution. President Biden wants to send aid to states and localities, but many congressional Republicans are opposed. Raising taxes is politically unpopular, so states will be forced to trim spending on programs such as education or social services. Cuts in those areas slowed the economic recovery after the 2007-09 recession. For now, states' financial fortunes depend on forces beyond their control, including the debate over federal aid and the ongoing consequences of the pandemic.

Photo of a woman in a car receiving the Moderna COVID-19 vaccine in San Bernardino, California. (Getty Images/Los Angeles Times/Irfan Khan)
A woman receives the Moderna COVID-19 vaccine in February at a site run by the San Bernardino, Calif., Public Health Department. States and localities are grappling with increased pandemic-related expenses despite declining tax revenues. (Getty Images/Los Angeles Times/Irfan Khan)
ISSUE TRACKER for Related Reports
State and Local Governments
Feb. 26, 2021  State Finances
Sep. 11, 2009  State Budget Crisis
Oct. 03, 2003  State Budget Crises
Dec. 24, 1971  State Legislatures in Transition
Sep. 25, 1968  State Constitutional Reform
Oct. 11, 1967  Local Government Modernization
Aug. 15, 1956  Metropolitan Government
May 25, 1939  Reorganization of City Government
Feb. 24, 1939  Reorganization of County Government
May 23, 1938  Reorganization of State Governments
Oct. 29, 1937  State Control of Local Government
Sep. 01, 1936  Consolidation of Local Governments
Jan. 03, 1933  Reorganization of Local Government
Jun. 02, 1930  Changes in American City Government
Oct. 30, 1924  Political Statistics of the States
Budget and the Economy
Congress Actions
Consumer Behavior
Deficit, Federal Debt, and Balanced Budget
Economic Analyses, Forecasts, and Statistics
Economic Crises
Economic Development
General Employment and Labor
Infectious Diseases
Medical Devices and Technology
Party Politics
Party Politics
Powers and History of the Presidency
State and Local Taxes
State, Local, and Intergovernmental Relations
Unemployment and Employment Programs
Unions and Labor-Management Relations
Welfare and Welfare Reform