In recent days, President Donald Trump and other top Republicans have expressed objections to providing federal aid to states with high public employee pension costs like Illinois, New York and New Jersey. They argue that Congress shouldn’t borrow taxpayer dollars to fix problems some states have created for themselves.
“Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help?” Trump tweeted on Monday.
Democrats responded by noting that large, populous states like New York already subsidize other states in federal aid and that they, therefore, ought to be treated the same by Congress in any future coronavirus bill.
The coronavirus epidemic has pummeled revenues for just about every state, regardless of party association. State officials in Texas say the state is already in a recession. Tourism in coastal states like Florida and South Carolina has dried up, costing their budgets billions in sales taxes. Coupled with the nosediving oil prices, oil-producing states like Louisiana, North Dakota and Alaska are facing even more difficulty raising revenue.
The budget shortfalls are expected to worsen due to the uncertain timeline of the crisis, putting a serious strain on the states’ ability to adequately fund schools, health care and other programs without major spending cuts. That’s why even some Republicans acknowledge the next relief package will provide aid to cities and states, despite their opposition to including it in the last coronavirus bill Congress passed last week.
“There probably will be another state and local funding bill,” Senate Majority Leader Mitch McConnell (R-Ky.) told Fox News radio host Guy Benson on Monday.
The Kentucky Republican added, however, that the aid ought to be limited to costs “directly related to the coronavirus outbreak.”
McConnell’s own state has also faced problems with its two largest pension funds, which support tens of thousands of retirees. Attempted changes to the program sparked a teacher-led backlash in 2018 that helped Democrat Andy Beshear oust its then-GOP governor Matt Bevin in a narrow victory.
The issue will likely come to a head during negotiations over another economic relief package when Congress returns to Washington next week. Democrats previously pushed for making the $150 billion Congress already included for states and cities in its $2 trillion relief bill available to be used for lost revenues, but Republicans successfully blocked the effort.
“We want to make sure that these people who are risking their lives to save other people’s lives are not risking their jobs as well because the state and localities cannot pay them,” Speaker Nancy Pelosi (D-Calif.) said Monday on MSNBC. “It’s not about bureaucracy. It’s about delivery of service to the American people.”
There is bipartisan support for a state and local economic rescue package. Sens. Bob Menendez (D-N.J.) and Bill Cassidy (R-La.) proposed a $500 billion fund to help states hit hardest by the pandemic as part of the next congressional bill.
“We must ensure our local governments have the resources and flexibility they need to fund essential services like first responders, police and fire departments,” Sen. Rob Portman (R-Ohio) wrote in an editorial calling for federal aid to localities last week.
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