BBC Content Team
Finance of States
States have an easier task than the federal government when it comes to balancing budgets. However, currently we are in a financial crisis and that makes the task of keeping the budget of each state intact a lot harder. The same thing happened when the 2008 recession hit. Companies began to dismiss employees, and unemployment benefits were allocated at a much higher rate. Besides this, states must focus on infrastructure, and the organization of public works as well as coordinating federal position elections in their state.
When it comes to the citizens within the states, it's a balancing act on deciding in which state you want to reside. There is often struggle to find a balance, as the states with more expensive costs to live and taxes, also have better education, infrastructure, and unions for workers to make more.
Before the COVID-19 outbreak hit the United States hardest, many states had record amounts of reserve money, as it has been over a decade since 2008. However, with just these funds, states would only be able to run government normally for just under a month, so it does not include the new amount of unemployment checks state government must write, and they are failing to keep up at the moment. Now, those states' rainy day funds are deteriorating.
The effect this has on the future is a large one. First of all, it means smaller tax returns for those within each state. Next, it means that infrastructure projects in each state will hit a sharp decline until the budgets recover, as will other programs in education. Economic expansion through taxation might be the fastest way to get states back on track, as we’ve seen in past periods of economic downturn. However, legislation can be passed to add to states’ budgets during the remainder of the pandemic. Only time will tell.