One of the odd things about the coronavirus stimulus debate in Washington has been the tendency of Republican leaders — including the president — to treat the dire fiscal needs of state and local governments as a partisan issue calling for the back of Washington’s hand rather than the immediate and flexible relief the leaders of those front-line governments keep requesting. What makes it even stranger: 26 of the 50 governors are Republicans, and 61 of the 99 state legislative chambers (Nebraska’s is unicameral) are controlled by Republicans.
Both Trump and Mitch McConnell have used the stimulus debate to attack a few conspicuous Democratic-controlled state governments they love to hate, notably California, Illinois, and New York. But Trump has gone further, suggesting in an interview with the New York Post that all the state governments asking for relief are Democratic-controlled or are asking for “bailouts” unrelated to the coronavirus:
“I think Congress is inclined to do a lot of things but I don’t think they’re inclined to do bailouts. A bailout is different than, you know, reimbursing for the plague,” said Trump, …
“It’s not fair to the Republicans because all the states that need help — they’re run by Democrats in every case. Florida is doing phenomenal, Texas is doing phenomenal, the Midwest is, you know, fantastic — very little debt.”
Trump also said, “You look at Illinois, you look at New York, look at California, you know, those three, there’s tremendous debt there, and many others.
His distinction between “reimbursing for the plague” and “bailouts” ignores the fact that state leaders from both parties keep asking for general-purpose aid they can use for any purpose related to the pandemic, which includes not just “reimbursements” but replacement of lost revenues. The Atlanta-Journal Constitution reports that Georgia’s very Republican state legislative bodies are asking for just that kind of flexible assistance, and a lot of it:
Last week, House Appropriations Chairman Terry England, R-Auburn, Senate Appropriations Chairman Blake Tillery, R-Vidalia, and Gov. Brian Kemp’s budget director Kelly Farr, sent a memo to state agencies asking for plans to cut 14% from their budgets in the coming [fiscal year which starts on July 1]. That will mean cutting more than $3.5 billion, a move that could bring furloughs and layoffs among Georgia’s 200,000 teachers and state employees. …
England and Tillery sent a letter Monday to the state’s congressional delegation lending their voice of support for more federal aid. “[W]e respectfully ask that you advocate and support the appropriation of $500 billion in flexible state stabilization funds that are proportionately distributed to help offset greater upheaval and longer recovery in Georgia.”
It’s happening everywhere, in red and blue states alike, as CNN has noted:
A recent Moody’s Analytics report found that state fiscal shock could total $203 billion through the end of fiscal 2021, roughly 18% to 23% of last year’s general fund revenue. Even after taking reserves into account, 33 states would have to fill budget gaps of at least 5% and 21 of those states are looking at shortfalls of 10% or more.
One of the states Moody’s had bad news for was “phenomenal” Florida, concluding that the state’s reserves won’t survive the coronavirus thanks to a double whammy of lost tax revenue and higher Medicaid spending:
The analysis predicted that a “moderate stress” scenario would create a “combined fiscal shock” of $8.1 billion for Florida — a figure more than double the amount the state has in reserves. A more severe scenario, which envisions travel and business restrictions remaining in place into the third quarter, would result in a $10 billion “combined fiscal shock” to the state, analysts predicted in the report. In each scenario, Florida is projected to be one of 10 states whose budgets would be hit hardest.
Another one of Trump’s phenomenal Republican states, Texas, is looking down the barrel of big budget cuts, too, particularly as oil and gas revenues plunge, reports the Texas Tribune:
Texas House Speaker Dennis Bonnen has reached out to fellow state leaders to initiate conversations about the state’s economic fallout from the coronavirus pandemic, suggesting that the lower chamber would like to discuss a directive to all state agencies “to immediately identify and execute 5% budgetary savings….”
Bonnen also noted that “additional cuts may be warranted” after Comptroller Glenn Hegar provides his revised fiscal forecast, which is expected to happen in July. Hegar has said that the state is in a recession due to the pandemic — but that he does not yet “know how deep or how wide it’s going to be” and that it will be at least a couple of months before his agency has a good idea of the data from the economic fallout.
Doesn’t sound good. Meanwhile in Republican-governed Ohio, the process of budget cuts is farther along, as Crain’s Cleveland Business explains:
At the end of February, Ohio’s revenues for the fiscal year were running ahead of estimates by more than $200 million. With April’s figures in hand, those revenues have now dropped below budget estimates by $776.9 million. That’s a turnaround of almost $1 billion in the space of two months.
Against the backdrop of that “profound impact,” Gov. Mike DeWine at his Tuesday, May 5, news conference announced a package of long-expected cuts to the state budget.
These included K-12 and higher education, Medicaid, and virtually all state agency operations.
As my colleague Eric Levitz has noted, it’s ridiculous to claim you are combating unemployment and boosting consumer spending while promoting policies that ensure contradictory actions by other levels of government:
Beyond the fact that Republican-leaning states are hurting for aid about as much as blue ones are, the president’s party has a profound political interest in mitigating the economic impact of an election-year recession. This is ostensibly why Republicans promoted mailing checks directly to low-income and middle-class households: to prop up consumer demand and prevent economic decline from feeding on itself. And yet, if states are forced to lay off public workers, cut social benefits for constituents, and cancel planned investments in public goods, then they will deepen the recession.
Perhaps Trump and his allies are just engaging in some light anti-government demagoguery, or are justifying a business-first approach to coronavirus stimulus that leaves little or no room for anything else. But unless they come around, they are going to damage their own efforts to revive the economy, and throw Republican governors and legislators under the bus for no good reason.