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Smith's Research & Gradings
Volume: 
XXIX
Issue: 
2
Author: 
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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Stay on top of the latest global news that can impact your investment strategy.

Persistent Drought Conditions in the West Require New Water Policies and Compacts

Over six days during the middle of June 2021, a dome of hot air languished over the western United States, causing temperatures to rise to unprecedented levels. From June 15-20, all-time maximum temperature records were set at locations in seven different states

Jobs Number May Indicate Covid Economy is Over

Wow! The U.S. economy added 467,000 jobs last month, keeping the unemployment rate in the 4.0% area. Also impressive is that there were large upward revisions from previous months. We say 'wow' because there was such negative sentiment prior to the release of the jobs number.

Clean Energy Needs Reliability Requirement

Clean energy needs to include reliability requirement as new technology advances. Transformation of the energy mix used in electricity generation globally has been focused on development of renewable sources of energy such as wind and solar, but the major stumbling block has remained reliability.

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