Alabama K-12 schools will receive nearly $900 million in federal funds allocated in the most recent COVID-19 relief bill, nearly four times the amount received from the CARES Act. The governor’s study group on gambling policy estimated the state could generate $510-$710 million in revenue, and create up to 19,000 jobs, from a lottery, casinos and sports betting if authorized by a constitutional amendment. The state’s higher education commission is examining budget proposals to increase the retention of college graduates, especially in STEM fields.
Alaska’s governor last month proposed a budget for fiscal 2022 that would cut state spending on services while distributing nearly $5,000 Permanent Fund dividend payments. The proposal relies heavily on a $6.3 billion draw from the Alaska Permanent Fund’s earnings to pay for government services and the dividend payments. The proposed budget also includes a $350 million bond package for infrastructure development. The state’s traditional oil revenue sources are expected to fall to their lowest level since 1979.
Arizona universities received an additional $115 million in coronavirus relief funds from the state. Public and charter schools face a $266 million budget deficit, driven by declines in enrollment and by how the state funds remote learning schools. A state judge heard arguments over whether to reject the tax on high-income earners to support education spending, approved by voters in November. The state is experiencing a severe teacher shortage, according to a survey of school districts.
Arkansas’ general revenue collections in December were down $8.3 million compared to the prior year but exceeded the April forecast by $42.9 million; fiscal year to date general revenue collections increased by $320.7 million over the prior year and exceeded the forecast by $348.7 million. Medical marijuana sales have topped $200 million since sales began in May 2019. The state’s top individual income tax rate dropped from 6.6 percent to 5.9 percent on January 1. The governor signed an executive order to prevent employers from paying nearly $210 million in increased unemployment insurance rates due to effects of the COVID-19 pandemic.
California’s governor announced he will call for a $4.5 billion stimulus program that includes a variety of grants and tax incentives as part of his fiscal 2022 budget, set to be unveiled today. Building on this plan, the governor also said the budget will propose $600 stimulus checks for low-income residents who qualify for the state Earned Income Tax Credit, as well as an extension of the state’s eviction moratorium. The governor also announced a $2 billion plan designed to encourage and support local school districts to reopen schools for in-person learning.
Colorado’s governor extended an order providing payments to residents facing financial hardship. State economists warn that despite a quicker-than-expected economic rebound, recovery will be uneven, the state still faces a structural budget deficit, and much uncertainty remains. Public school enrollment declined 3.3 percent in fall 2020, the first drop recorded in 30 years, which could have funding implications for school districts. State employees will receive paid family medical leave in 2021, but the program may need further legislative approval beyond this year.
Connecticut’s governor delivered his State of the State address and discussed working with neighboring states on COVID-19 as well as other issues including transportation and stronger protections against cyberattacks. The state is projecting an operating shortfall of $640.2 million, an improvement of $239.2 million from November, driven by improved revenue collections and expenditure trends; the projected shortfall represents 3.2 percent of the general fund. The governor is directing another $31.2 million to the state’s nursing homes, which have experienced occupancy declines and rising costs during the pandemic.
Delaware’s Economic and Financial Advisory Council set the spending limit at about $5.15 billion for the governor’s proposed fiscal 2022 budget, $202.4 million higher than its October projection. One of the main reasons for the improved financial status is the record high level of realty transfer tax revenue. The state is anticipated to end the current fiscal year with a $495 million surplus that will carry over into the next budget. The state announced a new round of relief funding of $26 million to support small businesses most affected by COVID-19 restrictions and $10 million in relief funding for arts organizations. The state will spend $9 million filling in school district budgets to prevent teacher layoffs amid a decline in student enrollment during the pandemic.
Florida’s Revenue Estimating Conference added back $1.5 billion to a general revenue projection for the current fiscal year and $623 million for fiscal year 2022, after reducing estimates in August by $3.42 billion and $2 billion, respectively. Facing budget shortfalls, legislators are considering bills to require sales tax collection on all online purchases, which could generate more than $320 million. The Social Services Estimating Conference forecast increased Medicaid enrollment by nearly 700,000 by fiscal 2022 and projected a nearly $1.25 billion shortfall in this year’s Medicaid budget primarily caused by the end of enhanced federal funding. Unemployment taxes increased for 2021, with rates going from one tenth of a percent to nearly three tenths of a percent on the first $7,000 in wages.
Georgia’s overall tax collections in November were up 8.3 percent over the prior year and through the first five months of the fiscal year collections were ahead by $551 million. Legislators face an uncertain economy during the upcoming session. Legislators and staff must be tested for COVID-19 twice a week during the upcoming session and will be required to wear face masks. The state corrections department notified staff of a plan to privatize correctional health care services, following previous moves to privatize mental health and dental services.
Hawaii’s governor released a biennial budget for fiscal 2022-2023 that calls for reductions to operating and capital spending in response to annual revenue losses of roughly $1.4 billion compared to pre-COVID-19 projections. Proposed general fund spending would decrease 4.5 percent in fiscal 2022 and 3.1 percent in fiscal 2023 compared to fiscal 2021 levels. The budget would eliminate 550 vacant positions and 149 currently filled positions. It is uncertain whether the governor will propose tax increases and revenue enhancements. Following passage of the federal relief package in December, the governor delayed implementation of state worker furloughs previously scheduled to begin on January 1.
Idaho legislative leaders identified the balance of power, COVID-19, property taxes, education and roads as major agenda items to address in the upcoming session. A university study shows the state has a $242 million transportation funding gap. The Joint Economic Outlook & Revenue Assessment Committee convened this week to review economic indicators ahead of the release of the new revised general fund revenue forecast and governor’s fiscal 2022 budget, to be released on January 11.
Illinois’ governor announced $711 million in budget cuts for fiscal 2021 to help address a $3.9 billion revenue shortfall including hiring freezes, reductions in some grant programs, and delaying scheduled rate increases, among other items; the moves follow the defeat of a graduated income tax proposal on the November ballot, and the governor said approximately $2 billion of the shortfall is due to the pandemic, while the rest is part of an ongoing structural deficit. Legal marijuana sales are expected to top $1 billion in 2020, while sports betting also continues to grow. The legislature is expected to focus on COVID-19, redistricting, social issues, and balancing the budget during the current session.
Indiana’s House is considering a plan to fix a school funding issue that negatively impacts schools that have switched to online learning due to COVID-19. The legislature is also considering legal liability protections related to the pandemic. Other issues expected to be considered in the new session include crafting the next two-year budget, redistricting, and the governor’s legal authority related to public health emergencies. The governor earlier said that he will extend the state of emergency for a tenth time. The state released an improved revenue forecast for the current and next two-year budget. The governor has called for increasing K-12 funding and reversing higher education cuts in the next budget.
Iowa’s legislature is expected to consider a number of issues in the upcoming session including addressing COVID-19, K-12 school funding, considering additional funding for higher education and tax reform. The governor is slated to give her Condition of the State speech on January 12th. The state recently released a contract proposal calling for no pay increases over the next two years for many state employees. Iowa is planning on using some virus aid to help fund state police officers. The state recently increased its revenue forecast, but the budget director noted that much uncertainty remains and the economic outlook is very complicated.
Kansas’ revenues were above projections in December as corporate income tax collections grew, although the governor stressed the need to be prudent and exercise caution moving forward; the governor is preparing to present a new budget plan to the legislature after they convene on January 11. The pandemic has led to a number of changes at public health agencies in the state. The governor said the state’s reported last place COVID-19 inoculation rating is misleading due to reporting lags. Many counties noted the recent extension of the federal deadline for spending CARES Act funds came too late to be very helpful. The governor is proposing a new treatment center for inmates with substance abuse problems.
Kentucky’s legislature recently convened for a 30-day session; a one-year state budget will be passed since last year lawmakers approved a one-year rather than two-year budget due to economic uncertainty caused by the pandemic. The state’s Consensus Forecasting Group, a panel of economists, has projected a mere $53.2 million gain in revenue during the next year. Bills have been introduced to rein in the governor’s executive powers in times of emergencies and a ban on most no-knock search warrants is also expected. A plan to increase funding for transportation infrastructure by raising the gas tax, adding new fees, and adjusting formulas for distribution is also expected. The governor’s budget priorities include boosting public education and health care. Other initiatives include infrastructure, legalized sports betting and medical marijuana, and expanded access to broadband and telehealth. Lawmakers will also address Kentucky’s unemployment insurance trust fund which was drained in 2020.
Louisiana has experienced a 208,000 person increase in its Medicaid enrollment over the last year, bringing the number of people in the state receiving health coverage through Medicaid to 1.8 million. Lawmakers used $16 million in federal Coronavirus Relief Funds to pay for unemployment benefits and mobile devices for schoolchildren, as the original deadline to spend the dollars was approaching. The state’s local governments warn of layoffs and cuts due to the lack of relief in the latest federal relief package. The Louisiana Department of Fish and Wildlife is asking for an emergency appropriation of $20 million in state dollars, and an increase in fees, to avoid cuts to staff and fishing, hunting, and conservation programs. Lawmakers approved the use of tolls to pay for a new Interstate 10 bridge over the Calcasieu River.
Maine’s enrollment in public schools dropped by more than 4 percent this year, as the coronavirus pandemic is driving more families to enroll in private school or home-school their children. The state is also working to boost internet capacity at hundreds of schools. State lawmakers are proposing a variety of bills in reaction to the coronavirus, with measures that range from protecting the rights of COVID-19 patients to helping businesses hardest hit by pandemic-related restrictions. Other bills focus on COVID-19 vaccination, either by setting vaccine policies into law or by prohibiting mandates that would require vaccination. The state received federal approval to expand substance use disorder treatment for Medicaid beneficiaries.
Maryland revenue forecasters expect revenue to be down by $609 million in the current fiscal year and $312 million in fiscal year 2022, an improvement from the September forecast. Businesses and self-employed workers or independent contractors with estimated tax returns and payments due on January 15 were granted extensions to April 15, a benefit of more than $1.5 billion. State employees received a previously negotiated 2 percent salary increase on January 1 due to an improved financial situation. The recently passed federal omnibus spending bill and COVID-19 relief package will send funds to the state across multiple programs.
Massachusetts’ governor signed the fiscal 2021 budget into law, a $45.9 billion plan that protects core government services, includes investments in economic development and education, and maintains significant financial reserves for the future. The administration also launched a $668 million program to provide financial assistance to small businesses impacted by the COVID-19 pandemic. Lawmakers passed a $16.5 billion transportation bond bill for highway and bridge maintenance, train modernization, and major capital projects.
Michigan’s governor signed more than three dozen criminal justice reform measures, with many arising from recommendations from the Michigan Joint Task Force on Jail and Pretrial Incarceration. The governor pocket vetoed a DUI expungement bill and other bills. The governor signed a COVID-19 relief bill but vetoed some funding directed to help prop up the Unemployment Insurance Trust Fund. The governor also signed bills banning water shutoffs and allowing virtual meetings by local governments. The Michigan Supreme Court deadlocked on a case that would allow public funding to be used for private school reimbursements, affirming the spending is allowable.
Minnesota’s legislature is beginning its new session and is expected to focus on the next two-year budget, COVID-19, the governor’s emergency powers, redistricting, voter ID, and racial justice reforms. State officials are seeking to speed up vaccination efforts. The governor announced plans to reopen elementary schools and is loosening restrictions on indoor dining. The legislature earlier approved a $242 million aid package for businesses and workers. The University of Minnesota is considering a loan to help cover about half of an expected $166 million budget deficit.
Mississippi’s Supreme Court upheld the governor’s partial veto of legislation allocating COVID-19 relief funds to multiple entities. Nearly $80 million in lottery funds were utilized to address transportation maintenance projects and repave more than 250 miles of highway. The legislative session began as lawmakers expect to consider issues including a teacher pay raise, state income tax changes, expanding Medicaid and criminal justice reform. Lawmakers are unsure if a phase-out of the personal income tax will be approved this session after being proposed by the governor; the state collected $1.8 billion from individual income taxes last fiscal year.
Missouri’s governor released $127 million in previously blocked spending for fiscal 2021, he also announced an additional $68 million in federal funding for higher education infrastructure and capital improvements. The legislature is expected to focus on the budget, education funding, charter schools, examining a gas tax increase, implementing voter approved Medicaid expansion, redistricting, foster care reform, and possible changes to the state’s medical marijuana program in the upcoming session. The state is expecting to collect approximately $419 million less in revenue next year.
Montana’s newly sworn-in governor signaled support for a bill that would freeze base salaries for state employees in fiscal 2022, followed by a pay raise in fiscal 2023. The state board of regents is expected to approve the allocation of federal COVID-19 funding from coronavirus relief funds and the Governor’s Emergency Education Relief Fund. Schools in the state will receive more than $170 million from the K-12 education fund (ESSER II) as part of the recently passed federal relief package.
Nebraska’s legislature is expected to consider the next two-year budget, a proposed $230 million state prison to address overcrowding, education funding, health care services, tax reform, and redistricting in the upcoming session. The state is currently expecting to have more revenue than initially expected after the outbreak of COVID-19, but will have to balance competing spending demands. The state’s court system saw the smallest amount of fillings in ten years following the pandemic. The state’s motor fuel tax rate is dropping in 2021 as driving patterns return to a more normal level.
Nevada faces a general fund budget deficit of at least $535 million for the next biennium, and state lawmakers expect a difficult budget process this session. The state entered the new year with a 10.1 percent unemployment rate, with nearly 1.59 million state residents having filed initial jobless claims in 2020. Lawmakers approved more than $200 million in allocations of federal coronavirus relief funds, with the majority of those funds going to pay for salaries of state workers, personal protective equipment, and other eligible administrative costs. The legislature will consider a pair of tax proposals that would raise more than $1 billion annually for schools.
New Hampshire’s University System, financially hard-hit hospitals and struggling nonprofit groups will share the remaining $23 million of the state’s $1.2 billion Coronavirus Relief Fund. Revenues through December were $6.3 million ahead of forecast with the hospitality industry bringing in less than expected but offset by real estate transactions higher than expected, and business taxes exceeding estimates. The governor’s next two-year state budget is expected to deal with the aftermath of the economic fallout from the coronavirus.
New Jersey’s November revenue collections for the major taxes totaled $2.3 billion, up 5.8 percent above last November. Fiscal year-to-date, total collections through November are down $548.3 million, or 5.0 percent below the same five months last year. The state approved a $14 billion tax incentive program to encourage businesses to stay in or move to the state. Lawmakers also approved $58 million in funding to buy body cameras for police officers. The governor announced a $250 million investment in a manufacturing facility that makes components for the offshore wind industry. The governor signed a bill lessening the impact of a $940 million unemployment payroll tax increase on businesses by phasing in the increased tax through July 2023.
New Mexico’s state education agency proposed a new school funding concept, the family income index, to target education reform funding to specific schools that have a disproportionate number of low-income students. Meanwhile, educational leaders in the state are pushing for the state to hold school districts harmless for enrollment declines seen this school year. The state collected $2.8 billion in revenue from oil and gas development in fiscal 2020, despite the pandemic, according to an industry analysis.
New York’s tax receipts through November were $3 billion lower than last year, according to the monthly state cash report released by the comptroller. Tax receipts from the start of the state’s fiscal year in April through November were $374.6 million above the most recent projections. The governor announced $1.5 billion in state funding to organizations with cash-flow issues. The governor plans to propose legalizing the sale, taxation and use of marijuana, and to permit mobile betting in an array of sports contests in the upcoming budget. Three upstate prisons are scheduled to close in early 2021.
North Carolina’s Supreme Court ruled that the constitutional authority on how to appropriate federal block grant funds lies with the General Assembly. The governor and legislative leaders reached a compromise on spending $30 million in federal CARES Act funds on broadband expansion. The governor mobilized the National Guard to support COVID-19 vaccination activities. The state is estimated to receive nearly $700 million in federal funds for rental assistance, as allocated in the recently enacted COVID-19 relief bill. State employees and public school teachers who begin after January 1, 2021 will no longer qualify for retiree health coverage following a change included in the 2017 budget law.
North Dakota’s governor, in his State of the State address, promoted his budget proposal that he said will benefit future generations, and said that while the coronavirus battle is far from over, there is light at the end of the tunnel. Legislators, in the upcoming session, are expected to focus on addressing COVID-19, the two-year budget including possible strategic cuts, a bonding bill, infrastructure funding, education spending, and changes to the governor’s emergency powers. Legislators recently proposed a $1.1 billion bonding proposal for infrastructure projects across the state; earlier the governor released a $1.25 billion proposal. An oil industry trade group is asking lawmakers to ease the amount of interest and penalties the state can charge companies for unpaid oil and gas royalties.
Ohio lawmakers passed a $2.5 billion capital budget bill for construction and renovation projects across the state, which the governor later signed. The governor also recently signed a water quality bill and four other measures. A group that won a school funding lawsuit 23 years ago against the state recently hired a law firm to sue over vouchers. The state Supreme Court delayed the collection of $170 million in consumer fees related to a bill that bailed out two nuclear plants and is now the focus of a federal bribery scandal. The legislature is expected to consider the next two-year state budget, addressing COVID-19, examining the governor’s emergency powers, redistricting, and reforms to the nuclear plant bill in its upcoming session.
Oklahoma’s Board of Equalization certified that state lawmakers will have $8.46 billion to spend for the fiscal year 2022 budget, an increase of more than 8 percent over the current budget. Top legislative issues this year include high-speed internet expansion, education reform, and stabilizing the budget. The governor announced the allocation of $6 million in federal CARES Act funds to replenish food banks across the state. The state is planning a $39 million project to overhaul and modernize its unemployment system which will increase the speed and ability to process claims. Funding was secured to launch a training academy for approximately 65 highway patrol cadets later this year.
Oregon’s governor called lawmakers in for a one-day special session to address rental assistance and other issues. During the session, lawmakers approved directing $800 million to the state’s emergency fund, accessible to a special legislative committee when the legislature is not in session; $400 million in the fund is dedicated to COVID-19 related costs. The legislature also extended the state’s eviction moratorium and created a $150 million relief fund to help landlords whose tenants have been unable to pay rent.
Pennsylvania collected $3.7 billion in general fund revenue in December, which was $465.8 million, or 14.5 percent, more than anticipated. Fiscal year-to-date general fund collections through December total $18.5 billion, which is $467.1 million, or 2.6 percent, above estimate. Total revenue generated from gaming in November totaled more than $284.2 million, an almost 3 percent drop compared to the prior year when revenue totaled more than $292 million. The governor recently announced a plan to make $145 million available as grants to businesses impacted by COVID-19. The state department of transportation continues to examine long-term funding solution including tolls and a vehicle miles traveled tax.
Rhode Island's governor signed the fiscal 2021 $12.7 billion budget that maintains government services while the state recovers from COVID-19 and avoids layoffs, tax hikes, fee increases or cuts in services. The budget includes $400 million in proposed new borrowing, that will go to voters in March for investments in housing, pre-K classrooms, beaches and parks, higher education, roads, bridges, and other infrastructure. The state has earmarked all $1.25 billion from the Coronavirus Relief Fund with about $490 million of the total allocated towards business and economic support.
South Carolina’s governor allocated $20 million in federal COVID-19 relief funds for foster children education services, extended learning for 4-year-old kindergarteners, and job training at technical colleges. School districts received more than $84 million from the federal Coronavirus Relief Fund to help reopen facilities and support online learning. The state will receive $940.4 million for K-12 education from the recently enacted federal COVID-19 relief bill. Nearly 3,000 small businesses and nonprofit organizations will receive $65 million in emergency grants, funded from federal CARES Act dollars. The state received a $3 million federal grant to help pay for tourism marketing efforts.
South Dakota lawmakers are examining the governor’s proposal to increase teacher pay as they consider the fiscal 2022 budget. The state’s higher education system is facing long-term financial challenges due to the pandemic and an enrollment decline that began in 2016. A lawsuit has been filed challenging a voter approved amendment legalizing marijuana in the state. Outdoor recreation in the state has seen an increase since the beginning of the pandemic.
Tennessee tax revenue exceeded the budget estimate by $129.5 million in November and overall state revenue was up nearly 2 percent over the prior year; sales tax revenue was boosted by the first collection of a state tax on online purchases. The governor called a special session to prioritize legislation aimed at helping schools during the COVID-19 pandemic and prepare for the next academic year. The state’s last portion of an income tax, known as the Hall income tax on interests and dividends, ended on January 1. The state will receive an estimated $1.1 billion for K-12 education from the recently enacted federal COVID-19 relief bill and at least 90 percent must be distributed to local education agencies.
Texas’ governor ordered two state agencies to comply with a federal judge’s orders on foster care services to avoid potential $75,000 per day fines after the judge found the state in contempt of court. Lawmakers face an uncertain economic picture during the 2021 legislative session that includes development of the next biennial budget, including how to fund a significantly expanded pre-kindergarten program. The Dallas Federal Reserve’s service sector outlook found the service sector, which accounts for nearly 70 percent of the state’s economy, grew modestly in December following weakness in November.
Utah’s new governor identified expanding COVID-19 testing in schools and accelerating vaccine distribution as priorities upon taking office. Committee lawmakers gave early approval to a $121 million appropriation for one-time bonuses to K-12 teachers, with the caveat that the payments would only go to teachers in districts offering at least some in-person learning by January 19. Lawmakers do not expect to divert education funding to support social programs for children and disabled individuals this year, despite a voter-approved amendment. The legislature could consider a $1 billion transportation bond in its upcoming session. The state gas tax increased just slightly this year.
Vermont’s November revenue collections for the general fund, transportation fund, and education fund were a combined $26.55 million, or 18.0 percent above consensus expectations in November. Previously in August, the consensus revenue expectations were reduced for fiscal year 2021 by $278 million across the three major funds as a result of the pandemic. Vermont’s legislature is beginning its session and is expected to focus on balancing the budget, allocating new federal coronavirus aid, and providing aid to businesses. Business groups are advocating to focus on the critical issues of slowing the spread of the virus, distributing the vaccine, supporting health and safety measures, and working toward economic recovery in the upcoming legislative session.
Virginia’s governor proposed a two-year budget that restores about half of the $2.7 billion in spending that was put on hold earlier this year, including $90 million for vaccination efforts, $15.7 million for a rent and mortgage relief program, and a $650 million deposit to reserves. The budget includes $500 million for schools, including funds for enrollment decreases and a 2 percent bonus for teachers and support staff. The governor directed $20 million in federal CARES Act funds for pending grants to small businesses and nonprofits, for total funding of $120 million to the Rebuild VA fund. The governor signed an order preventing unemployment insurance tax rates from going up for businesses who furloughed or laid off employees early in the pandemic and directing an immediate payment of benefits for backlogged claims.
Washington’s governor unveiled a $57.6 billion biennial budget for fiscal 2022-2023, which represents a 10.5 percent spending increase over the current biennium and includes $1.7 billion in new spending initiatives to support economic recovery, deliver social assistance, and protect the environment. The plan would be partially funded by tapping reserves and creating a capital gains tax; it also calls for a tax on health insurers, which would go to a dedicated fund to improve public health. K-12 enrollment declines combined with reopening costs due to the pandemic are posing budgeting challenges.
West Virginia tax collections dropped in December, missing estimates by $4.5 million and coming in $46.03 million below December 2019 collections. Collections of personal income and severance taxes both were less than expected. Despite this fall in revenue, the state’s tax collections are still running a surplus for the 2020-21 budget year. Even with an extension to the deadline for spending federal Coronavirus Relief Funds, the governor announced West Virginia will spend all but $30-39 million by the end of 2020. $445.7 million was expected to be used to pay unemployment benefits and replenish the state’s unemployment insurance trust fund, and $265 million was expected to be paid to cities and counties to reimburse COVID-19 expenses.
Wisconsin’s governor said he would likely veto a COVID-19 bill being considered in the legislature with a series of measures that he opposes; earlier the governor had proposed a compromise $100 million coronavirus relief bill. The legislature will need to consider a series of measures in this session including COVID-19 relief, the next two-year budget, and redistricting. The governor said criminal justice reform will likely be in his next budget; a special session on policing recently ended without the legislature taking any action. Wisconsin saw an increase in the use of state parks in 2020, following the outbreak of the pandemic.
Wyoming lawmakers will consider legislation that would reduce public education funding by $100 million, a 6.5 percent cut, and potentially increase the state sales tax rate by one percentage point, in response to steep revenue declines in the state. Committee lawmakers narrowly advanced a measure to increase cigarette and tobacco taxes during interim meetings, while a measure to gradually raise mill levies to supplement education funding was narrowly rejected. State park fees were increased this calendar year, some by as much as 60 percent.