(The Center Square) – As the coronavirus pandemic continues to wreak havoc on the American economy, lawmakers and budget officials in Concord and other state capitals across the country will have to reckon with its impact on state revenue and spending.
Greg Moore, state director of Americans for Prosperity and a former chief of staff for the New Hampshire House of Representatives, explains the impact of COVID-19 on the state budget is a three-part process: loss in revenue and increase in expenses, reductions within the state government, and leaders seeking federal assistance to fill in the gaps.
"We’re going to be seeing a drop in revenue," Moore told The Center Square. "Certainly a State that doesn’t have a sales or an income tax has a number of variants that it is dependent upon for taxes."
Revenue generated from the meals and rentals tax, for example, will be lower since Gov. Chris Sununu, in accordance with the federal Centers for Disease Control and Prevention's guidelines, banned most public gatherings and ordered restaurants to only serve via delivery, takeout and drive-thrus.
"Our businesses are letting go of employees and there is a lot less business activity which will have a major impact on State revenues," Moore said.
While revenues are decreasing, expenses in the state's unemployment funds are increasing – a record-breaking 16,000 people have filed claims for unemployment benefits since March 16, NHPR reports.
"The State has expanded its unemployment eligibility, as well as given more of an opportunity for people to claim so that they don’t have to wait a week before they file," Moore said.
In early March, the state's unemployment fund's balance was approximately $300 million. Its funds are supporting not only workers who are laid off but also parents who can't work because they have to stay home to take care of their children since schools have closed.
"If the funds drop below $150 [million,] then that starts raising tax rates on businesses and employers," Moore said.
In response, Sununu wrote a letter to the Fiscal Committee on March 13.
"I have asked all Department heads to start making plans to potentially reduce expenditures," Sununu said in the letter. "I am going to ask some Department heads to take immediate actions to cut expenses."
On Friday, Sununu also wrote a letter to House Speaker Nancy Pelosi and Senate Majority Leader Mitch McConnell seeking federal assistance as the unemployment fund continues to be strained.
"I urge you … to allow Americans affected by the ongoing COVID-19 crisis to receive assistance under the (Disaster Unemployment Assistance) program," Sununu said.
Moving forward, Moore said the continued impact of the crisis on the economy depends on how much longer it lasts.
"If this is a case where it is 2-3 weeks then at that point it might just be a blip and it might be a case where the Governor can handle it through the departments, just making a reduction," Moore said. "At this point no one can really wrap their arms around how long this will go."