Pennsylvania Unprepared for Next Recession
According to WHYY, Moody’s applied the financial stress test the Federal Reserve uses on banks to test if they could survive a moderate recession to the finances of the states.
The study found that a state would need to have a reserve of at least 7% to make it through a moderate recession without increases taxes or cutting spending. Pennsylvania’s lack of any real reserves means it would have to increase taxes or cut spending by a large amount to get through the recession.
“At a time when most states are looking forward to the next recession and trying to figure out how they can limit the impact of that recession on their economy and their budget, [in] Pennsylvania, we’re still worrying about how to recover from the past recession financially with our budget,” Moody’s Analytics Director Dan White told WHYY.
“For the average Pennsylvanian, what this means is that the next time we go through a recession, Pennsylvania is going to have to either significantly increase taxes or significantly cut state spending,” White added.