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States get pounded by virus, tax losses

The coronavirus is pounding state governments with a financial one-two punch, costing them millions to try to contain the disease just as businesses are shutting down and tax revenue is collapsing. The sharp drop in revenue could jeopardize some states’ ability to provide basic services.

States ranging from tiny Rhode Island to California, with the world’s fifth-largest economy, have warned that many programs are likely to face cuts or even elimination.

“I am gravely concerned about our ability to deliver basic services over the next six months to a year given the drop in revenues, and that’s why I am encouraging the Legislature to be extremely fiscally prudent,” Oregon Gov. Kate Brown, a Democrat, said about building the budget for the coming fiscal year.

Many states are blowing through the multi-billion dollar rainy day funds they built up after the end of the Great Recession. Without that cushion, government finance experts say, states would have been in much worse shape.

Virginia expects to take a hit of up to $2 billion. The result: Lawmakers may rescind the 2% annual raises just promised to teachers.

Christine Melendez, a high school Spanish teacher in Chesterfield County, said losing the raises would be a “slap in the face” to teachers who have endured years of stagnant pay. Like teachers across the country, they are improvising online lesson plans after schools were shuttered.

Melendez predicted there would be fierce pushback if teacher pay is not improved.

“We can only take so much,” she said.

States will get help from the $2.2 trillion stimulus passed by Congress this week and signed Friday by President Donald Trump. State, local and Native American tribal governments are in line for $150 billion in direct aid to combat the virus and could get more through other parts of the legislation.

How far that will go is unclear as the outbreak grows more severe in many states and shutdown measures are all but certain to be extended.

New York Gov. Andrew Cuomo, a Democrat, ripped the GOP-led Senate’s version of the coronavirus package as “terrible” for New York and said, based on preliminary reports, that it would send the state some $4 billion in direct aid. A Tax Foundation estimate shows the state government in line for nearly twice that much.

New York, which has become the epicenter of the coronavirus fight in the U.S., could see revenue drop by $15 billion, or about 8%, in the coming fiscal year, budget officials said. Another $12 billion that was expected to arrive soon will be delayed for months because the state, like others, is extending the tax filing deadline from April to July.

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