Moody’s Analytics: Most States are Well Prepared to Weather a Recession
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The majority of US states have the resources needed to get through an economic recession, according to a Moody’s Analytics study. A record 43 states have the cash they need to weather an economic slump without having to resort to severe spending cuts or tax increases. (Graphic: Business Wire)
“States have never been in a better position to make it through a recession,” said
While the stress test results find most states prepared for a recession, there is some variation in their degrees of readiness, according to the study. In total, 39 states have the funds to significantly reduce stress from a recession. Four states would have to raise taxes or cut spending by less than 5% of their budgets. However, seven states would have to resort to spending cuts or tax increases of more than 5% of their budgets.
States overly dependent on tourism and consumer spending will be most hard hit during a recession, according to the study. States with agriculture and energy-based economies are better positioned to weather the storm.
The bottom five states with less than a 10% revenue gap are:
In contrast, the states most flush with cash are:
To protect their budgets from increased volatility and fiscal drag, state and local policymakers should consider investing in their budget processes and make stress-testing a higher priority. “States may want to consider formulating targeted reserve levels,” Mandel added. “Planning for a recession requires putting away enough money today to prepare for a future downturn, without stunting economic growth.”
Read the state stress test study.
About Moody’s Analytics
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Source: Moody’s Analytics