America’s governors aren’t waiting for Washington to stimulate their economies.
Faced with unexpected budget surpluses after tax revenue held up better than anticipated during the pandemic, governors in more than half a dozen states are taking steps to help small businesses or provide cash to residents thrown out of work.
In Maryland, Republican Governor Larry Hogan is pushing for a $1 billion stimulus package that would provide one-time checks of as much as $750 to lower-income families. Michigan’s Gretchen Whitmer, a Democrat, is
The plans reflect a surprising way the pandemic has rippled through the nation’s economy. Initially confronted with the deepest contraction since World War II, states braced for a steep drop in revenue. But with higher-income Americans still able to work from home,
“The fact that some states have additional revenue gives them the opportunity to stimulate their own economy or help their residents,” said Karen Krop, a senior director at Fitch Ratings. “They can take that additional money and say, ‘What is our highest priority right now?’ And in most cases it is to stimulate their economy and help their citizens.”
The measures are small compared with the $1.9 trillion economic stimulus proposed by President Joe Biden, and big budget gaps are likely to reappear as states put together spending plans for the coming fiscal year since the surpluses are largely the result of pessimistic forecasts.
Overall state tax revenue still fell 3.2 percent between March and November from a year earlier, according to preliminary data from 46 states tracked by the Urban Institute, causing states to eliminate 373,000 jobs, more than were lost during the last downturn. Former Federal Reserve Chair Janet Yellen, Biden’s pick to head the Treasury Department, said last week that she’s concerned state and local budget cutting could stall the economic recovery as it did after the last recession, underscoring the administration’s plan to provide some $350 billion in aid.
For now, though, confronted with an unprecedented crisis, some governors are plowing short-term surpluses back into their economies.
Colorado has already
“It’s in each state’s interest to be as supportive, as they’re financially able, to help their tax base and tax generators to survive and come out stronger on the other side of COVID,” said Ty Schoback, senior municipal research analyst at Columbia Threadneedle Investments. States have “been able to take a little more of a scalpel approach and be a lot more intentional.”
Michigan’s Whitmer last week released a
Minnesota lawmakers were among the first to act. In December, they passed a $216 million relief package that includes direct payments to restaurants, bars and gyms. The state’s revenue department said that it helped nearly 3,900 businesses through the middle of this month.
Robert Doty, commissioner of the Minnesota Department of Revenue, said the aid is the “right thing to do” and will trickle down to business owners and employees, which is ultimately supportive for the state’s coffers as well. “Anything we can do to help is pretty cool,” he said.
South Carolina Governor Henry McMaster, a Republican, is incorporating small business relief as part of a
The governor has also proposed putting $500 million in reserve. The pandemic has been a reminder of the importance of preparing for the unexpected, said Brian Symmes, a spokesman for McMaster. “It can change at the drop of the hat,” he said.
— With assistance from Romy Varghese