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States' economies are showing the drastic effects the COVID-19 pandemic is creating, but Missouri and the federal government can cushion the long-term blow on the state's residents, according to a Missouri Budget Project report.
To help families make ends meet, aggressive state and local policy responses — done in tandem with federal moves — must be made, according to the report titled "The Crisis We Face: How Missouri Can Respond to the Economic Impacts of COVID-19."
The project is a nonprofit, public policy analysis organization that provides independent research on complex state policy issues and how they affect all Missourians. It works to enhance the ability of all Missourians to participate in the public debate and ensures advocates, policy makers and the public have the information they need to create sound fiscal policies, according to its website.
The pandemic is expected to increasingly create demand on the U.S. health care system — and exceed capacity in many cases, particularly for hospital critical care and intensive care beds, health care staffing, respirators and basic supplies.
The current responses of social distancing, home isolation and household quarantine could be required until a vaccine becomes available, possibly 12-18 months from now, the report states.
Much of the report makes a lot of sense, said state Rep. Rudy Veit, R-Wardsville.
"We have a crisis, and if we want people to isolate themselves, they have to be able to survive," Veit said. "If we don't provide proper medical care, income care, people are going to have to go into the public. That defeats the possibility of defeating this virus through isolation."
Many economists say the unemployment rate will be pushed past 9 percent, but some think the pandemic could drive unemployment to 20 percent, according to the report.
"A 9 percent unemployment rate would be similar to what was faced during the Great Recession, while 20 percent represents an economic decline not seen since the Great Depression," the report says.
Missouri revenues will crater as the expected economic slump sets in, according to the Missouri Budget Project.
"If the economic conditions that followed 9/11 occurred today, it would result in a combined loss of more than $1.8 billion in state green revenue between the current fiscal year and fiscal year 2022," the report says. "Similarly, if the Great Recession occurred today, state general revenue would drop by $937 million in fiscal years 2020 and 2021 combined, followed by a decrease of $1.9 billion in fiscal year 2022."
Any loss incurred because the filing deadline for income taxes has been pushed back by two months would be temporary.
During the Great Recession, those receiving health care through Medicaid in Missouri increased by 100,000. Those who received food assistance through the Supplemental Nutrition Assistance Program (SNAP) increased by 249,000, according to the report.
The state has already eased nearly 200 rules that would slow its response to COVID-19, such as allowing physicians to work across state lines. It has eased regulations on telehealth availability. It has also requested and been granted a federal disaster declaration.
"Assistance from the federal government through increased federal reimbursement for Medicaid and direct aid to states will be critical, but the amount of aid is not yet confirmed. Moreover, federal assistance may not be adequate to meet the state's emergency and recovery needs given the scope of the economic downturn," the report says.
This week, the Missouri General Assembly is expected to pass a supplemental budget for 2020, allowing the state to accept and spend hundreds of millions of dollars on federal money.
Missouri lawmakers should provide notations on the state budget that allow departments to use additional and unexpected federal funds outside the normal budgeting seasons. They should improve the Missouri Budget Reserve Fund by quickly writing and passing a joint resolution so voters can change the state Constitution concerning the fund in August, the report states. Currently, any revenue taken out of the fund must be paid back on a certain timeline with interest.
The report supports elimination of any interest payments and ties the repayment schedule to economic indicators, rather than an arbitrary schedule.
"That is a necessary step that we have to do because these aren't ordinary times," Veit said. "When the economy turns around, revenue could possibly jump a lot. We are going to need it to pay off the debt. Also, the (tax) basis is lower, so we'll have less revenue than we did before."
Now is the time for the state to implement a "Wayfair Tax," the report says. Only two states — Missouri and Florida — have refused to tax online sales.
Veit said the so-called Wayfair Tax isn't a new tax at all. Missouri already requires taxes on items bought online, just has no method of collecting the taxes.
"Some want to bring the revenue in and dedicate it to things like highways or education. Others say it should go to general revenue," Veit said. "Their logic is exactly what happened. We have a crisis on our hands. This gives us the ability to address those issues."
Designating the revenue to a specific item ties the state's hands, Veit said. He has argued from the beginning that the money should go into general revenue.
"The issue has broad bipartisan support but has remained mired in discussions of other tax reforms," the report says. "Given the urgent need to shore up state revenue, lawmakers should pass a clean version of the bill without delay."
Missouri should suspend work searches, job share and waiting period requirements for unemployment. And recent projections show the 13-20 weeks of unemployment assistance the state provides will be too short for a long-term recovery.
Congress provided federal funding for 26 weeks of unemployment recovery.
The Missouri Department of Social Services and MO HealthNet (the state's Medicaid program) have enacted several changes in response to COVID-19; however, those changes are only for 90 days. Changes — such as allowing people ages 19-64 who test positive for COVID-19 to receive Medicaid coverage or easing restrictions on prescription refills — should be enacted for the entire length of the pending recession resulting from COVID-19, the report says.
The state still needs to streamline the application process for MO HealthNet.
Another recommended change would be to offer a Missouri Earned Income Tax Credit to support the middle class and spur local economic growth.
"Those (recommendations) are all temporary in nature," Veit said. "And right now, we have a time when we're going to have to help out everybody."