States have avoided a Great Depression-scale cash crisis. Despite the pandemic’s crushing toll on the economy, total state tax revenues were roughly flat in 2020 from the year before, according to the Urban Institute, a Washington, D.C., think tank, the Wall Street Journal reported. Last spring, stores shut down to contain the spread of COVID-19 and unemployment skyrocketed. People spent less money on everything from shoes to restaurants to salons. Sales tax collections fell billions of dollars short of forecasts. But widespread federal intervention buoyed households, businesses and financial markets and helped avert analysts’ doomsday projections for state revenues. The stable employment environment for the country’s most affluent workers also brought in stronger than expected tax revenue. Analysts still expect states to confront budget gaps as the pandemic enters its second year, but they are projecting smaller shortfalls partially filled in with federal aid. A Democrat-led Congress is now debating another massive round of federal aid, amid objections from Republicans. The cash that would help contain the crisis began trickling in around the country in early spring with congressional approval of a $2 trillion stimulus package. The federal government sent checks for $1,200 to many households, and Americans spent about 29% of those checks, according to the Federal Reserve Bank of New York, further boosting state sales tax revenues.
