States have begun to announce major projected budget shortfalls. Some estimates put the national total at $500 billion. The COVID-19 pandemic has not only decreased revenues, but also increased the need for state spending. The result is large gaps and looming calamity. Many states are asking the federal government to include relief in future stimulus packages. Some leaders in Washington have even suggested that states file for bankruptcy, but that has many adverse and disruptive consequences and is likely unconstitutional.
While the diversified state economy continues to grow, one area that will continue to feel the pains of lower oil prices will be the State Treasury. Texas greatly benefited from the oil boom through revenue from natural gas and oil production taxes, which equal 7.5% of the market value of natural gas and 4.6% of the value of oil production in the state. Sales taxes, motor fuels taxes, and many other sources of funds tend to rise with the price and production of oil.