Four US states vulnerable to fiscal stress in downturn

A new report published by S&P Global Ratings shows that a few states are much more vulnerable to future economic downturns. They could struggle to adjust to manage any weakened fiscal position. These states are yet to fully recover from the countrywide recession which officially ended in 2009. The conclusions were arrived at by S&P analyzing fiscal health all over the US. The conclusion that most of 10 US states which have outstanding tax supported debt enjoys a limited capacity when it comes to staving off effects of any moderate recession. Fiscally non-resilient states included in this list are California, Wisconsin, Illinois, New Jersey, Pennsylvania , Washington, Florida and Massachusetts. The rating was done on the respective states’ budgets of 2016 to 2017.

The presidential contests among the Republican and Democratic candidates regard three states – Florida, Pennsylvania and Michigan as pivotal with a combined power of 65 electoral votes. This equals one quarter of 270 required to take control of the White House. President Barack Obama won from Wisconsin in both 2008 and 2012. The state has a firm Democratic tilt during other election cycles as well. The state is regarded as a must win in 2016 with its valuable 10 electoral votes.

For Hillary Clinton, the presidential nominee of the Democratic Party, there is good news. Recent polls have revealed that she enjoys a lead in the double digits with the latest polls held in Pennsylvania state. She leads Donald Trump, her presidential challenger from the Republican Party in Michigan. She also closed gap in Florida. Clinton visited Florida on August 8. Trump had already toured Michigan and Pennsylvania during recent weeks.

The analysis made by S&P has calculated tax revenues from primary general fund of 10 states. These states have the maximum oustanding tax supported debt. It discovered that such states may experience a total revenue shortfall amounting to $27.1 billion. In other ways, a drop of $27.1 billion or about 7.7 percent may occur in any recession characterized by moderate sympathy. The tax revenue from the primary general fund includes everything from corporate income taxes to personal income and even sales taxes. According to S&P, the four most vulnerable states are Illinois, Connecticut, Pennsylvania and New Jersey. They are at maximum risk of considerable fiscal stress. Budget reserves in such four stats are equal to less than half compared to potential revenue under-performance which is estimated to be possible during a moderate intensity recession’s maiden year.

Leave a Comment