In an analysis with implications for higher education, a Moody’s Analytics analysis released Tuesday found many states are facing having to make budget cuts in the recession caused by the coronavirus pandemic.
Even under a recession having a moderate impact on the recovery, in which travel and business restrictions last through August, the analysis found that "21 states may have to go through the painful process of filling budget holes of 10 percent or more even after using all of their available reserve balances."
But if disruptions continue for longer, Moody’s estimated the number of states having to fill large budget holes would balloon to 34.
Either would be bad news for colleges and universities already facing their own financial problems caused by the pandemic, experts say, because states often look toward higher education to make budget cuts because of restrictions on reducing other areas of their budgets.
Most affected are states relying on volatile revenue streams like oil and gas taxes, as well as those relying on industries like tourism, finance and energy. Among the hardest hit are Alaska, Louisiana and New Jersey.
On the bright side, more states had been stocking away money in reserves. "State governments in the aggregate have never been more prepared for a downturn than they are at this moment,” Moody's said.
Seventeen states have reserves large enough to absorb the shorter period of disruptions with relatively minor fiscal difficulty, according to the analysis. But that number would drop to three -- Wyoming, New Mexico and Alaska -- if disruptions last longer.
-- Kery Murakami