During the Great Recession, tax collections fell so steeply that state and local governments furloughed and laid off police officers and cut aid to key services like health care, transportation and schools. Some cities turned off streetlights to save on electricity, and Hawaii cut its school aid so much that it closed them down altogether on many Fridays.
The current downturn is shaping up to be worse, and bipartisan groups of governors and mayors from around the country have been pleading with Washington for aid to help them keep workers on their payrolls as they grapple with a growing public health and economic crisis.
But Congress did not provide money for state governments in the new $484 billion aid package that the House was expected to pass on Thursday, after Democrats failed to persuade Republicans to do so, setting up the next political battle over pandemic relief.
Senator Mitch McConnell, Republican of Kentucky and the majority leader, made it clear that he was reluctant to give them federal aid, suggesting that some should consider bankruptcy.
“I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” Mr. McConnell said in an interview with the conservative radio host Hugh Hewitt. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.”
It is true that some states, including Illinois, were struggling with enormous pension fund shortfalls before the pandemic sent the markets plummeting, eroding the values of their funds and adding to their current budget woes. But many states and cities that were doing well before the virus hit are now seeing their tax collections fall off a cliff, which could force them to furlough and lay off workers and cut services as the crisis has driven needs higher than usual.
States now do not have the ability to declare bankruptcy to reduce their financial obligations, but Mr. McConnell raised the possibility of letting them do so.
“I would certainly be in favor of allowing states to use the bankruptcy route,” he said.
The National Governors Association, a bipartisan group of governors from around the country, wrote federal officials this week pleading for $500 billion to help them make up for lost tax revenues during what they called “the most dramatic contraction of the U.S. economy since World War II.”
“These continuing losses will force states and territories not only to make drastic cuts to the programs we depend on to provide economic security, educational opportunities and public safety, but the national economic recovery will be dramatically hampered,” the group’s chairman, Gov. Larry Hogan of Maryland, a Republican, wrote with its vice chairman, Gov. Andrew M. Cuomo of New York, a Democrat.
Mr. Hogan said in an interview with Politico on Thursday that he thought Mr. McConnell would come to “regret” his remarks. “The last thing we need in the middle of an economic crisis is to have the states all filing bankruptcy all across America and not able to provide services to people who desperately need them,” he said. Gov. Jay Inslee of Washington, a Democrat, was blunter, calling Mr. McConnell’s comments “nuts” in an appearance Thursday on ABC’s “The View.”
Mr. Trump gave ambivalent signals at his White House briefing on Thursday, suggesting that he might be open to offering aid to the states but also saying, “It is interesting that the states that are in trouble do happen to be blue.”
In New York State, where officials were forecasting a shortfall of between $10 billion and $15 billion, Thomas P. DiNapoli, the state comptroller, wrote in a report this week that the crisis had left “greater uncertainty this year than ever before as to the level of funding the state will be able to provide for school districts, health care providers, local governments and others.”
Mr. McConnell’s staff issued his statement under the heading “Stopping Blue State Bailouts,” which suggested that the top Senate Republican was singling out heavily Democratic states such as California, Illinois and New York, which have been hit hard in the pandemic.
Mr. Cuomo accused Mr. McConnell of hyperpartisanship, calling the “blue-state bailout” label “vicious.”
“How ugly a thought,” Mr. Cuomo said Thursday. “Think of what he is saying. People died — 15,000 people died in New York, but they were predominately Democrats, so why should we help them?”
Reference: The New York TImes
