State revenue shortfall smaller than expected, but economic recovery to take time

Published: Nov. 19, 2020 at 8:37 PM EST
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RICHMOND, Va. (WDBJ) - The consultant who briefed the Virginia Senate Finance Committee Thursday joked he’s gone through every letter of the alphabet trying to describe the current business cycle.

“I’m sure you’ve heard U-shaped recession, V-shaped recession, I’ve heard Nike Swoosh recession,” said Dan White, director of government consulting and fiscal policy research with Moody Analytics. “And the short answer is that this business cycle doesn’t look like anything we’ve ever seen before.”

How quickly we recover, White said, will depend on another round of economic stimulus, as well as the roll-out, distribution and acceptance of a COVID-19 vaccine.

“There are parts of this business cycle that are going to look worse before they look better,” White told the lawmakers. “That owes to the increase in infections that we see right now, but we do get to the other side of this eventually. There is a light at the end of the tunnel.”

Senate Finance staffers said state revenues have been better than expected, with sales tax, corporate income tax and real estate recordation taxes leading the way.

“Accounting for money in the bank and the improving outlook,” said Fiscal Analyst Charles Kennington, ”staff think it’s reasonable to add back about 1.5 billion of the 2.7 billion that was subtracted from the two-year forecast in August.”

Despite an improving forecast, Senate Finance staffers said lawmakers still have tough decisions ahead in 2021 and beyond.

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