States could face $765b shortfall: study

State budgets could face a $765 billion shortfall in the coming three years, according to a study from the left-leaning Center on Budget and Policy Priorities.

The CBPP report said it will be crucial for the federal government to provide aid to states, which are required to balance their budgets and can’t run up deficits like the federal government.

But it’s estimate of what’s needed is lower than the $1 trillion included in legislation approved on a party-line vote in the House last week.

The report did say state and local governments will need more than what Congress has already allocated. 

“Federal aid that policymakers provided in earlier COVID-19 packages isn’t nearly enough,” wrote Michael Leachman, CBPP’s vice president for state fiscal policy, who authored the study.

He estimated states will face a $600 billion deficit even taking account various state “rainy day” funds that could be used. 

“Without substantial federal help during this crisis, they very likely will deeply cut areas such as education and health care, lay off teachers and other workers in large numbers, and cancel contracts with many businesses,” Leachman wrote.

“That would worsen the recession, delay the recovery, and further harm families and communities,” he added.

The figures in the study were revised up from a late April estimate of $650 billion, based on new projections from the Congressional Budget Office and Goldman Sachs.

State and local government funding has become a central dispute between Democrats and Republicans for the next coronavirus relief package.

Democrats have made it a priority, but Republicans are divided on the issue, with some saying they do not want to have the federal government make up for mismanaged state governments.

Senate Majority Leader Mitch McConnell (R-Ky.) has conceded that the next bill would need to include some level of relief for cash-strapped state and local governments.

“There probably will be another state and local funding bill but we need to make sure that we achieve something that will go beyond simply sending out money,” he said in late April.