For some reason, the fiscal crisis engulfing states and localities due to the COVID-19 pandemic has the power to cloud Republicans’ minds.
There could be no other explanation for the resolute disdain shown by the GOP congressional caucus toward the $350-billion provision of state and local aid in President Biden’s $1.9-trillion pandemic relief proposal.
“This is no time to send wheelbarrows of cash to state and local governments that they simply, factually, do not need,” Senate Minority Leader Mitch McConnell (R-Ky.) huffed earlier this month.
The states aren’t out of the woods yet.
Brian Sigritz, National Assn. of State Budget Officers
“By the way,” he added, “state and local tax receipts already fully rebounded in Q3 to their highest level in American history.”
Sticking a shiv into the very concept of bipartisanship on Capitol Hill, McConnell’s press release attacking the state and local aid provision bore the heading, “Democrats Are Yet Again Pushing Massive Bailouts For Big-Spending States.”
It’s hard to pinpoint where McConnell gets his information, but the best that can be said about it is that it’s cherry-picked.
State revenues are expected to fall by 4.4% in fiscal 2021 (that is, from July 1, 2020, through June 30, 2021, including the third quarter of 2020) compared to “already depressed fiscal 2020 levels,” the National Assn. of State Budget Officers reported last fall.
That would mean a drop of 10.8% from revenue projections in pre-pandemic budget proposals, the association said.
States and local governments face a revenue shortfall of $200 billion to $300 billion through fiscal 2022, the Center on Budget and Policy Priorities calculated this month — and that’s assuming they wipe out all the rainy-day savings they had accumulated before the pandemic struck.
As for the assertion that Biden’s pandemic relief would be a handout to “big-spending” (read “Democratic”) states, it’s true that California would receive the largest share, $41 billion, according to a Democratic markup of the proposal.
That’s because California is the biggest state. The second-biggest recipient would be red Texas, getting $27 billion; red Florida comes in fourth, at $16.5 billion. The pandemic has been a bipartisan fiscal threat.
The sleight-of-hand stunt McConnell is offering his audience is that states and localities have done better fiscally than anyone expected in the first months of the pandemic.
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“A lot of states sharply reduced revenue forecasts downward immediately after the outbreak of COVID-19,” Brian Sigritz, NASBO’s director of state fiscal studies, told me.
For a variety of reasons, the most dire expectations didn’t come true. But in the majority of states, revenue still hasn’t recovered to pre-pandemic levels.
“Money is still tight and states still need to respond to COVID-19,” Sigritz says. “The states aren’t out of the woods yet.”
Another misleading factor is that the national picture of state and local finances is skewed by a single outlier: California.
Last May, as legislators and Gov. Gavin Newsom crafted the 2020-2021 state budget, “they were projecting a bloodbath,” Byron Lutz, a fiscal analyst for the Federal Reserve Board, told a Brookings Institution webcast audience on Feb. 10.
“They thought they were going to be down $30…