States still face massive revenue shortfalls

States still face massive revenue shortfalls

Despite the better-than-expected jobs report for May, many states are still facing massive revenue shortfalls because of the fallout from Covid-19. A new report by Elizabeth McNichol and Michael Leachman of the Center on Budget and Policy Priorities finds that states face a collective $615 billion shortfall through the 2022 fiscal year. Since states are required to balance their budgets, a shortfall means they either have to raise new revenue or make cuts to services that people need. McNichol and Leachman explain why more relief is needed from the federal government.

Revised Treasury Department guidance indicates that states can use some of the aid provided in the CARES Act to cover payroll costs for public safety and public health workers through December 30, but even adding that to other existing federal aid likely won’t cover much more than $100 billion of the state shortfalls, leaving nearly $515 billion unaddressed. States hold $75 billion in their rainy day funds, a historically high amount, but far too little to meet the unprecedented challenges they now face. And, even if states use all of it to cover their shortfalls, that would still leave them about $440 billion short. The shortfalls that local governments, tribes, and territories face are in addition to this.


The power of the pen
On Monday, Gov. John Bel Edwards signed a GOP plan that diverts $300 million of coronavirus relief funds away from local governments to small businesses. But Edwards also vetoed House Bill 846, which would have created a new state subsidy for retail, restaurant and hotel industry jobs, with no requirements that employers offer any of the benefits or higher wages that allow workers to live in security. The AP’s Melinda Deslatte reports: 

The governor, who has unsuccessfully sought to raise Louisiana’s minimum wage, objected because the payroll subsidy wouldn’t have prioritized higher-paying jobs and instead would allow any business creating five new, minimum wage-jobs to qualify. In his veto message, Edwards called such an incentive “contrary to the sentiment of the people of Louisiana that our workforce should be able to earn a true living wage.” He also said Louisiana shouldn’t be creating programs with a sizable price tag amid the economic uncertainties of COVID-19.

The Louisiana Budget Project and Power Coalition for Equity and Justice urged Edwards to veto this misguided and unaffordable legislation.


Treating racism as a public health crisis
State and local governments across the country are beginning to treat racism as a public health emergency. The link between racism and health disparities mostly focuses on factors such as access to quality medical care, poverty, unemployment, poor housing and toxic environmental exposure. But more people are starting to understand the negative effect that racism itself has on all Black Americans. Stateline’s Christine Vestal reports: 

But after class and poverty are accounted for, African Americans still have worse health outcomes than white Americans. Public health studies have shown that the racism African Americans experience in their daily lives creates stress that affects their internal organs and overall physical health. This results in a higher prevalence of chronic diseases such as high blood pressure, asthma and diabetes, and a shorter lifespan. The health equity gap between wealthy African Americans and well-to-do whites is even wider. A 2018 study by researchers at Ohio State University found that “racial disparities in health tend to be more pronounced at the upper ends of the socioeconomic spectrum.” The cause? “Acute and chronic discrimination,” the researchers said.


Price gouging coronavirus tests
Health care is an essential service, but health care “consumers”—a.k.a., patients—often have no idea what their medical care will cost until after they’ve seen a doctor or gone in for lab tests. And because the government doesn’t regulate health care prices, American health care costs are high overall and widely variable, with the same service sometimes arbitrarily costing 100 times more at one hospital than at another. Sarah Kliff, writing for The New York Times’ Upshot blog, explains how some health care providers are taking advantage of federal relief to charge exorbitant prices for coronavirus tests during a global pandemic. 

Health care providers testing for coronavirus also have additional protections if they want to charge high prices. The recent CARES Act requires that insurers cover the full cost of coronavirus testing, with no co-pays or deductibles applied to the patient. The health plans must also pay an out-of-network doctor or lab its full charge so long as the provider posts that “cash price” online. “If you are an out-of-network lab, you can name your price,” said Loren Adler, an associate director at the U.S.C.-Brookings Schaeffer Initiative for Health Policy. “I could say it’s $50,000, and you are required to pay me that amount.”


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Number of the Day
1.5 million – Number of workers state and local governments have furloughed or laid off from March – May 2020. This is twice as many that were laid off in all of the Great Recession. (Source: U.S. Bureau of Labor Statistics via Center on Budget and Policy Priorities