Tourism Declines Take a Toll on State Revenues
Hawaii, Florida, and Nevada predict significant budget hits after leisure and hospitality job losses from pandemic.
By Mike Maciag
Hawaii’s economy thrives on tourism and all the dollars spent at hotels, restaurants, and attractions throughout the state. So when the COVID-19 pandemic forced business closures and grounded air travel in March, the islands sustained a major economic blow. Leisure and hospitality workers suffered massive layoffs, and as of November state employment in the industry remained down 42% from February.
Nationally, leisure and hospitality jobs have endured by far the largest losses of any major industry. A review of U.S. Department of Labor jobs data for November, however, shows vast differences in how the industry has held up across states. Five had incurred sharp reductions of about a third or more from February’s pre-pandemic employment totals. A few others, meanwhile, had largely recovered from an initial wave of layoffs and were down less than 10%. For areas that lean heavily on tourism and hospitality, how the industry recovers matters not only for regional economies, but also for the vital tax dollars generated to fund state and local government budgets.
Leisure and hospitality employment dropped by more than 7.5 million jobs nationwide immediately following the business closures and travel restrictions issued in March. Just over half of the lost jobs, including temporary layoffs, have since been recovered in the industry, defined to include restaurants, drinking establishments, lodging, attractions, and related venues. Still, November job estimates remained down about 20% from February, three times the private sector’s total rate of decline.
The industry supports at least some jobs everywhere, but the resulting revenues are especially critical for tourism-dependent states. Leisure and hospitality workers accounted for a quarter of Nevada’s and nearly 20% of Hawaii’s labor force last year, for example.
The hit to Hawaii’s budget has been severe: The state’s January revenue forecast shows an estimated 15.6% general fund tax revenue loss in fiscal year 2021 on top of a 9.7% decline in fiscal year 2020 from pre-pandemic projections. In fact, when estimated revenues for both years are compared with fiscal 2019, the cumulative decline in percentage terms is greater than any other nonenergy state, according to a Pew analysis of revenue forecasts.
No major source of tax revenue has gone unscathed. Hawaii Department of Taxation data shows that taxes on transient accommodations and rental vehicles had nearly vanished as of June, and excise taxes assessed on businesses were down about 16% over the year. Although these revenue streams sustained especially sharp declines, income taxes and other sources weren’t spared, either.
The state’s revenue losses aren’t surprising given the absence of tourists. The first week of December, the number of passengers flying to Hawaii was still down more than 70% from a year ago. Hotels and resorts have sustained severe losses as fewer travelers are checking in. Some remain open, albeit with limited capacity, but others have shut down entirely. In March, Governor David Ige (D) issued a mandatory 14-day quarantine for all arriving travelers that remains in effect. In October, the state implemented a new pre-travel testing program exempting those testing negative for COVID-19 from the quarantine. Policymakers hoped that could lead some tourists to opt not to cancel their plans.
Nevada also experienced a dramatic tourism slowdown. Like Hawaii, the state relies heavily on the industry to fund its budget: The hotel and casino industry generates about 38% of general fund revenue, according to figures published by the Nevada Resort Association.
In March, Governor Steve Sisolak (D) ordered nonessential businesses to close, shuttering casinos and cutting off a key revenue stream. Gaming revenues essentially disappeared as sales tax collections, which typically make up more than half of the state’s tax revenue, also plummeted. Casinos later reopened with restrictions in early June. Unlike Hawaii, Nevada has since recovered the vast majority of leisure and hospitality jobs, down 14% since February.
Still, the state’s gaming revenue remained down 22% over the year in August. More broadly, sales tax collections remained down, but by a smaller margin.
Florida similarly faced sharper revenue reductions than most states did earlier, but its December forecast showed smaller losses than Hawaii or Nevada’s projections. Sales taxes, which account for the bulk of the state’s revenues, dipped about 3% last fiscal year.
The state’s economy is a long way from recovering, however, as leisure and hospitality employment remained 16% below February totals as of November. The pandemic canceled many spring break plans. Walt Disney World, which announced massive layoffs, and other major tourist destinations remained closed for months. In all, the number of visitors in the second quarter was down a staggering 61% from a year ago, according to Florida’s tourism bureau.
In sharp contrast, some areas of the country rely little on the industry for tax revenue. Leisure and hospitality employees last year made up the smallest shares of the workforce in Iowa and Nebraska, two states projecting among the least disruption to their budgets from the pandemic, according to a Pew review of state revenue forecasts. Nebraska Economic Forecasting Advisory Board members said the state’s economy was holding up better than elsewhere, in part because it relies less on hospitality services.
As of November, Hawaii (-42%), Massachusetts (-36%), and New York (-35%) had sustained the largest percentage losses in leisure and hospitality jobs from pre-pandemic totals in February, while industry employment was down about only 2% in Idaho and Oklahoma. But these jobs are more important to some states’ economies than others. The losses are most critical to Hawaii’s economy, where the sector accounts for nearly 1 in 5 jobs. The industry accounts for between 9% and 12% of total employment in nearly all other states.
Of course, many factors dictate states’ revenue losses. Government-mandated closures because of the coronavirus have shuttered many businesses. Other industries, such as energy and oil production, are also struggling. States’ varying tax structures further explain why some are projecting larger losses as certain revenue streams tend to be more volatile, particularly during a recession.
Going forward, how well the leisure and hospitality sector rebounds carries major implications for state budgets. So far, industry job growth has followed uneven trajectories across states. Some segments of the industry, too, face larger deficits.
In the coming months, much of the industry’s fate—and that of several states’ budgets—will depend largely on the course of the pandemic.
Mike Maciag is an officer with The Pew Charitable Trusts’ state fiscal health initiative.
How the Pandemic Has—and Hasn’t—Changed How Americans Work
By Kim Parker, Juliana Menasce Horowitz, and Rachel Minkin
The abrupt closure of many workplaces last spring ushered in an era of remote work for millions of Americans and may portend a significant shift in how a large segment of the workforce operates in the future. Only 1 in 5 workers who say their job responsibilities can be mainly done from home say they worked from home all or most of the time before the pandemic. Now, 71% of those workers are doing their job from home all or most of the time and more than half say they would want to keep doing so after the pandemic if given the choice, according to a Pew Research Center survey.
Of course, not all employed adults have that option. In fact, a majority of workers say their job responsibilities cannot be done from home, with a clear class divide between workers who can and cannot telework. Fully 62% of workers with a bachelor’s degree or more education say their work can be done from home. This compares with only 23% of those without a four-year college degree. Similarly, while a majority of upper-income workers can do their work from home, most lower- and middle-income workers cannot.
Among those who are not currently teleworking all of the time, about 8 in 10 say they have at least some in-person interaction with other people at their workplace, with 52% saying they interact with others a lot. About half of these workers say they’re concerned about being exposed to the coronavirus from the people they interact with at work or unknowingly exposing others.
While the coronavirus has changed the way many workers do their job, it hasn’t significantly reshaped the culture of work for most people. Among workers who are in the same job as they were before the coronavirus outbreak started, more than 6 in 10 say they are as satisfied with their job now as they were before the pandemic and that there’s been no change in their productivity or job security. Even higher shares say they are just as likely now to know what their supervisor expects of them as they were before and that they have the same opportunities for advancement.
Other findings of the survey, conducted in October of 10,332 U.S. adults, are:
A majority (64%) of those who are currently working from home all or most of the time say their workplace is currently closed or unavailable to them; 36% say they are choosing not to go to their workplace.
Younger teleworkers ages 18 to 49 are more likely (42%) than workers 50 and older (20%) to say they’ve had a hard time feeling motivated to do their work since the coronavirus outbreak started.
Parents with children younger than 18 who are teleworking are more likely to say it has been difficult to get their work done without interruptions (50%) than people without children under 18 (20%).
Kim Parker directs social trends research, Juliana Menasce Horowitz is associate research director, and Rachel Minkin is a research associate at the Pew Research Center.