Depleted sales tax revenue means states have to cut budgets – Marketplace

With consumer spending down a record 13.6% in April and another 1.9 million unemployment claims last week, states are collecting less money in taxes.

Texas, for example, collected a whopping 13% less in sales taxes last month than it did in May of 2019.

Revenues are way down, there’s no question about it,” said Michael Granoff, an accounting professor at the University of Texas at Austin. “They have to cut somewhere. Well, what do they spend their money on?”

Public education for one thing. That’s the state’s biggest expense.

Cal Jillson, professor of political science at Southern Methodist University in Dallas, said Texas is already near the bottom in per capita spending on education, and cuts will bring long-lasting economic pain.

“Everybody understands that education is preparation for the workforce, so Texas is truly between a rock and a hard place, and it’s likely worse than that,” he said.

Texas will also have to reduce health care spending, another big budget item. And things like highway maintenance will be delayed, too.

“We are going to cut to balance and then hope that we can replace those revenues in the coming years without doing irreparable damage,” Jillson said.

Texas is one of seven states without an income tax, which means it relies on sales taxes more than other states, like California or New York. But right now, all states are in the same boat.

“You pray that the federal government is going to step up to the plate and provide some relief soon,” said Michael Leachman, vice president for state fiscal policy at the Center on Budget and Policy Priorities. “You can also draw on your reserves. Besides those things, you don’t have good options.”

The federal government has tried to help state and local governments as part of the different COVID-19 relief packages, but most are going to need a lot more cash before revenue collection picks up again.

Which businesses are allowed to reopen right now? And which businesses are actually doing so?

As a patchwork of states start to reopen, businesses that fall into a gray area are wondering when they can reopen. In many places, salons are still shuttered. Bars are mostly closed, too, although restaurants may be allowed to ramp up, depending on the state. “It’s kind of all over the place,” said Elizabeth Milito of the National Federation of Independent Business.

Will you be able to go on vacation this summer?

There’s no chance that this summer will be a normal season for vacations either in the U.S. or internationally. But that doesn’t mean a trip will be impossible. People will just have to be smart about it. That could mean vacations closer to home, especially with gas prices so low. Air travel will be possible this summer, even if it is a very different experience than usual.

When does the expanded COVID-19 unemployment insurance run out?

The CARES Act, passed by Congress and signed by President Donald Trump in March, authorized extra unemployment payments, increasing the amount of money, and broadening who qualifies. The increased unemployment benefits have an expiration date — an extra $600 per week the act authorized ends on July 31.

You can find answers to more questions here.

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