Whether we like it or not, it seems that a global recession caused by the COVID-19 pandemic is imminent. since the last big financial downturn in the United States, most states have tried to secure better budgets and put away money for another possible economic downturn, but some states haven’t fared that well in the “money for rainy days” department.
Financial experts warn states could suffer record-high budget shortfalls due to the COVID-19 crisis. According to the Center on Budget and Policy Priorities (CBPP), the collective budget deficit could reach $290 billion in 2021, far greater than the deficit during the 2001 recession and 2007-2008 global economic crisis.
The vulnerable states already have low fiscal reserves. On top of that, some of their revenues will dramatically drop because their economies are heavily dependent on income taxes or energy production. To make it through, they will have to increase taxes or reduce spending by at least 4%. Read on to find out if your state is among the 10 least prepared states for an upcoming recession.
Note: Information on fiscal reserve, revenue and budget collected from the National Association of State Budget Officers. Economic consequences on state revenues estimated by Moody’s Analytics.