An American flag flies near Congress in Washington, DC, the US. Picture: EPA/SHAWN THEW
Most states have a fiscal year that runs from July to June, and as legislatures reconvene in January, they will be setting their budgets for the one that starts in July 2021. Many will face projected general revenue declines that, based on the most recent estimates, exceed 15%. Given the deficits that states face in 2021, any such additional relief is necessary. But there is a danger that this state support will expire too soon, as it has in the past. The state and local support included in the 2009 legislation, for example, averted a number of job losses. But because it also ended too soon, states slowed the already sluggish recovery that followed by constraining spending.
As GAO writes: “Because the prototype formula relies on labour-market data as an automatic trigger rather than legislative action, assistance would have begun earlier and extended longer than the assistance provided by the Recovery Act. The prototype formula would have triggered assistance to begin in January 2008 and end in September 2011, compared with the Recovery Act which provided [additional assistance] from October 2008 through June 2011.