PROVIDENCE – While state coffers across the country continue to feel the strain of the COVID-19 pandemic, the severity of prolonged fiscal shock may be worse in Rhode Island than the rest of the New England region, according to a new report by Moody’s Analytics.
Rhode Island was the only New England state facing fiscal shock above 1.8% based on projected budget shortfalls through fiscal 2022 as a percentage of its gross state product, the report stated. The national average was 1.3%, though several other states faced shortages above 2%, based upon the severity of their outbreaks, as well as those with prolonged shutdowns or with an “outsize reliance” on government spending.
As a baseline, Moody’s predicted a $450 billion shortfall when combining state and local government fiscal hits, representing about 2.2% of the economy. This assumes another $1.5 trillion in federal stimulus aid through unemployment insurance, payments to taxpayers and aid to state and local governments. If Congress fails to pass a package before the November election, or if the country sees a resurgence in COVID-19 cases, the gross national shortfall through fiscal 2022 could swell to $650 billion.
Still, the agency’s predictions have mellowed over prior outlooks thanks to a stronger-than-expected labor market and a better understanding of how federal money has aided in state and local governments.
Nancy Lavin is a staff writer for the PBN. Contact her at Lavin@PBN.com.
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