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Smith's Research & Gradings
February 1, 2021

Smith's Research & Gradings

KBRA: State Revenues Beating Predictions

KBRA: State Revenues Beating Predictions

Kroll Bond Rating Agency's (KBRA)review of state revenue was lead by Paul Kwiatkoski, Managing Director.  The State revenue losses show the results may be much less severe than originally estimated. In the months following the onset of the Coronavirus Pandemic, "the expected economic knock-on effects were severe due to the near cessation of economic activity throughout parts of the nation," with conditions only gradually improving through 2020 and beyond. Many states based their 2021 estimated revenues based on these early forecasts.

Estimates of national unemployment rates played a large roll in the miscalculations, Mr. Kwiatkoski explained. The Center on Budget and Policy Priorities (CBPP) based its state revenue estimates of May 2020 on Congressional Budget Office (CBO) forecasts of national unemployment rates that were expected to hit 11.5% at year-end 2020,before falling to 8.6% at year-end 2021.

"Other observers forecast even more dire economic conditions," Mr. Kwiatkoski said. "Goldman Sachs forecast a peak unemployment rate of 25% in the second quarter 2020. The actual level of unemployment was not this severe,having peaked at 14.8% in April 2020 before dropping to 6.7% at the end of 2020. In light of economic performance faring better than originally forecast and the strong link between state revenue collections and economic performance, state revenues were underestimated in many budget forecasts."

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Beirut’s Agony: Ports, Food, and China

On August 4th the port of Beirut was the scene of a horrific explosion, which killed more than 150 people, injured 6,000 and left some 300,000 homeless. The damages are estimated to be in excess of $15 billion. The city’s hospitals, already struggling due to the COVID-19 pandemic, were damaged by the blast and swamped with injured. On top of already raging economic and political crises, the explosion now raises the question of food security. Prior to the explosion, 80 percent of Lebanon’s imports passed through Beirut’s port. Without a functioning port in Beirut, the country now relies on a handful of secondary ports, chief among them being Tripoli in the north, to import food and to export its products.

Should State and Local Bailout Come With Strings?

One of the great lessons from the Puerto Rico bankruptcy was never to draw to an inside straight — in other words, state and local government politicians need to play the hand that is dealt.

Disastrous Puerto Rico Elections

Puerto Rico's elections were a mess. On Sunday, August 9, Puerto Rico was forced to partially suspend voting for primaries marred by a lack of ballots, as officials called on the president of the Commonwealth's elections commissioner Juan Ernesto Davila to resign. The primaries for voting centers that had not received ballots by early Sunday afternoon were expected to be rescheduled, while voting would continue elsewhere, the commission said.

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