On the Brink : State Budgets in Light of the COVID-19 Outbreak

As the full economic impact of the COVID-19 pandemic and economic lockdowns continue to be felt, states are bracing for massive revenue shortfalls. Over the last several weeks, states have begun massively reducing revenue projections and making contingency plans.

Now, a new report from one of the nation’s leading economic forecasting firms is warning states just how devastating the economic downturn could be for state budgets. According to Moody’s Analytics, state general fund revenues are projected to dip by an average of 20 percent in the coming months, leaving state policymakers scrambling to patch this massive budget hole. States are also projected to experience massive spikes in Medicaid spending, further straining budgets.

Unfortunately, many of these imminent symptoms have been developing for years as states expanded Medicaid eligibility and ballooned the program beyond recognition. Congress recently made the problem even worse by tying states’ hands even more during the public health emergency.

As the economic downturn continues to set in, states simply must have more flexibility to manage and protect their Medicaid programs for the truly needy.