Revenue projections spell bad news for Joint Budget Committee
While the General Assembly paused the session for two weeks, due to the novel coronavirus outbreak, lawmakers are still working behind the scenes.
That includes the budget writers of the Joint Budget Committee, which on March 16 got some bad news about state revenue projections that they were to use to do final work on the 2020-21 state budget.
Instead of an expected $832 million to pay for new programs and mandated cost increases, available revenue increases were estimated at $27.3 million. That’s not even enough to cover mandated inflationary increases for K-12 education and federal programs such as Medicaid.
JBC members told reporters that there is no money for new programs, nor the $52 million they had hoped to put toward paying down the budget stabilization factor, the debt owed to K-12 education since 2012. They wouldn’t rule out budget cuts, including to K-12 education, on Monday.
Both the economists with the governor’s office of state planning and budgeting and from the Legislative Council said the revenue forecasts are uncertain, and they attributed that uncertainty to two factors.
A fight between Russia and Saudi Arabia led to a steep decline in the price of a barrel of oil, which on March 16 was $31.50. That’s not enough for most producers to even make a profit, and in some cases, the economists said, it’s costing them money just to pull it out of the ground. The second factor, of course, is the downturn in the economy due to COVID-19.
For agriculture, however, different factors are at play, according to the Legislative Council forecast.
Economists said ag producers “face ongoing headwinds from low commodity prices and increasing competition from global producers. While some of the pressure from the trade war between the United States and China eased toward the end of 2019, “purchases of agricultural equipment are either costlier or unattainable” because of the trade war.
The phase one trade deal between the United States and China, signed on Jan. 15, requires China to purchase $32 billion more in agricultural products over the next two years.
But there are now questions about how much of that will happen because of the pandemic. Reuters reported last month that China has yet to make any purchases tied to the trade deal.
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