From the report, “COVID-19: Fiscal Impact to States and Strategies for Recovery,” from The Council of State Governments.
A few months into the COVID-19 pandemic, many unknown variables and outcomes remain that provide
increased risk and instability moving forward for states. The spread of the coronavirus continues to infiltrate the country moving in and out of communities causing devastating loss to human life. States grapple with how to address the exponential spread of the virus and keep the economy from grinding to a halt without generating
unintended consequences.
The pandemic uniquely affects state economic risk when compared to the prior Great Recession or other historical recessions. Whereas the Great Recession hit the financial industry workforce especially hard, the ability for employees to continue working remotely during the pandemic allowed many financial industry employees to continue business with relatively less interruption. However, employees in the tourism, entertainment, and food service industries faced severe disruption by travel restrictions and quarantine guidelines.
State-by-State Fiscal Risk Analysis
To gauge which states may be the most fiscally impacted by COVID-19, we examined five fiscal risk categories, inclusive of data measuring direct COVID-19 economic impacts. The categories examined include projected revenue shortfall, estimated increase in Medicaid spending, weeks of unemployment benefit funding remaining,
economic risk by distribution of state GDP across industry sectors, and pension benchmark rate of return. A score of 1 (high risk) or 0 (low risk) is included based on determined risk threshold for each category and those are aggregated to develop a risk score for a state. The effect from the coronavirus pandemic presents unique challenges from an ordinary economic downturn, and examination of states that are most at risk can provide insight into strategies for recovery and future risk mitigation strategies.
Learn more about the future fiscal risk by reading the full report, or by reading this section of the report, beginning on page 15.