The COVID-19 pandemic is changing the shape of the economy not just in the United States, but also, around the world. Fee and tax revenues are collapsing as issues related to the pandemic health crisis increase. Governments are asking people to stay at home to limit any potential community spread. The economic activity generated by travel and tourism is at an all-time low. The unemployment rate is also very low, and sports and other performance arenas are also shut down.
Michael E Weintraub Esq. On US efforts to balance budgets
Experts anticipated that the US GDP may plunge to a 30% annual rate in the second quarter. Congress is currently shoveling out over $2.2 trillion in aid to localities and states via the CARES Act and other welfare programs. Extra federal aid bills are also being implemented in the coming days. However, emergency support might not cover all emergency revenue shortfalls. States, either by practice or law, can’t run deficits similar to the federal government. Many governors have started to freeze non-essential expenditures and are suggesting program cuts. According to Michael E Weintraub Esq., attaining a balance might involve cost and revenue estimates and residual moving targets.
Short term initiatives
When it comes to short term initiatives, states, cities, and counties that account for close to 20% of the GDP are more likely to opt-in for a onetime economic initiative. Since 2015, there have been instances of states implementing such programs annually – some of this has been highlighted in “Truth and Integrity in State Budgeting: The Balancing Act.” Of all the five categories that were assessed, the report concluded by stating that theaim is to avoid covering recurring costs through a one-time revenue source. This could be comprised of budgetary and borrowing maneuvers that can push the expense forward by providing today’s services to future generations.
It was simpler to attain high budget grades when revenue collections were bountiful. This was similar to the prolonged economic recovery phase between 2009 and 2020. We might now see increased borrowing, as states can borrow cash to fund various relief programs to counteract the pandemic outbreak’s adverse impacts. There are also instances in which they can borrow from banks or from a municipal bond market to cover the variousrevenue shortfalls. This means that taxpayers will be payingfor the expense of current budget gaps through 2030.
There are several other tactics that state governments can use to manage budgetary distress. For instance, New Jersey is considering delaying the fiscal year’s start to September 1st. The aim here is to provide the budget officials with more time to get a hold of their expenditures and their revenue outlook. And even though this flexibility is inevitable and helpful, with the cost of combating the COVID-19 pandemic, state governments can not lose focus on getting back to more financially sustainable practices the moment the COVID-19 pandemic outbreak ends, or at least, diminishes in severity.
