Arizona Needs More Reserves To Weather An Economic Downturn

Published: Tuesday, September 18, 2018 - 3:09pm

While U.S. states’ financial health has strengthened in 2018 compared with last year, fewer than half have enough financial reserves to weather the first year of a moderate recession, according to a report released Monday.

Arizona ranks as the ninth least prepared state should a recession begin. The report by Standard and Poor’s says most states are actually worse off now than during the Great Recession because they rely more heavily on personal income tax to generate revenue than a decade ago.  Taxes currently contribute a combined 55 percent to the funds compared with 49 percent in 2008, according to the report.

The top 10 least prepared states include Louisiana, Oklahoma, North Dakota, New Jersey, Montana, Kentucky, Virginia, Missouri, Arizona and Illinois.

There are 15 states at risk of large revenue shortfalls in the first year of a recession, 21 states with moderate shortfall risks and 14 states expected to have low shortfalls. Increased social costs, like Medicaid, are also expected to stress state budgets.

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