Mayors from across the nation testified before Congress last Friday, asking lawmakers for more federal taxpayer money to help them meet massive budget shortfalls.
The $3 trillion HEROES Act, passed on May 15 on partisan lines by the Democrat-controlled House of Representatives, allocated $915 billion for state and local governments, with $375 billion of it designated for local governments.
The bill awaits action in the Senate, which is expected to offer significantly different legislation. The mayors made clear their preference for the House version over the yet-to-be-announced Senate legislation.
“We are your soldiers on the front line ready to take that money,” said Los Angeles Mayor Eric Garcetti. “To save our economy and save our people.”
Big NYC Deficit
New York City Mayor Bill de Blasio told the press last Wednesday that his city faces a deficit of $9 billion over the next two years. De Blasio asked the state legislature for permission to borrow $7 billion, and he urged Congress to send federal taxpayer money to cover the losses.
“There is literally no way that we can solve this problem without federal help or without having to make very, very painful choices that will affect the quality of life in this city, our ability to provide basic services and how many people we’re able to employ to support you in the middle of a pandemic,” de Blasio said.
“In the middle of a moment when we are spending billions of dollars to protect your health and safety—to make sure you’re fed, to make sure there’s a roof over your head—this is the very time where we’re not getting the help from the U.S. Senate or the president,” the mayor said.
In Massachusetts, “Almost the entire state Senate wrote a letter to the Massachusetts Congressional delegation, saying that the Bay State needs more help from the federal government to weather the COVID-19 crisis and outlining priorities for a future stimulus package,” the Taunton Gazette reports.
Gov. Gretchen Whitmer of Michigan is calling on Congress to send federal taxpayer money to help the state meet a deficit of at least $3 billion.
In addition to dedicating new state spending for coronavirus testing, treatment, and prevention, Michigan has lost a large amount of expected tax money because of the decisions to close businesses and force people to stay at home, Whitmer said.
“Right now the language in the CARES Act does not allow [states] to spend money on needs in the existing budget, even if they have lost money due to COVID-19,” WXYZ-Detroit reports Whitmer as saying.
Economic Health Checkup
House Minority Whip Steve Scalise (R-LA) said government revenue is dependent on economic health.
“No relief package we pass can substitute for a fully functioning economy, and all of that goes with an open and free society,” said Scalise.
Using the Crisis?
A major question is whether some states and local governments are using the crisis as a means to finance wasteful spending that benefits political interest groups.
In a meeting with President Donald Trump earlier in May, New Jersey governor Phil Murphy said his state “could need $20 billion to $30 billion—more than three-quarters of its entire current budget,” according to The Press of Atlantic City. Instead of making real spending cuts, the governor was simply “kicking the can down the road into the next fiscal year,” the paper’s editorial said.
“This is far from the demonstration of fiscal responsibility that would make the state’s strongest case for federal assistance,” the editors stated.
A Senate bill under consideration would base aid to states on population, coronavirus infection rate, and revenue loss, providing higher rewards for states that imposed the most draconian shutdowns. That would be a bailout for irresponsible state and local governments, the Press of Atlantic City argues.
“Such federal help, however, won’t address the dire fiscal problems state government has created over many years—excessive and deepening debt, and massively underfunded and overpromised pensions and health benefits for government workers. In a state already among the highest taxing in the country, those can only be addressed by a fiscal discipline so far almost entirely lacking among state leaders.,” the editors wrote.
The calls for additional money arrived at the same time as reports that many states haven’t spent the coronavirus relief funding they have already received.
“Many states have yet to spend the federal funding they received more than a month ago to help with soaring costs related to the coronavirus crisis, complicating governors’ arguments that they need hundreds of billions more from U.S. taxpayers,” AP reports.
“At least a dozen states have started distributing the money. But far more have not,” AP found.
“On a call with governors, Vice President Mike Pence said a majority of states had not yet sent money to cities and counties, some of which had to furlough staff as tax revenue dropped sharply,” AP reports. “He encouraged them ‘with great respect’ to get money out the door.”
Senate Majority Leader Mitch McConnell (R-KY) indicates states will have to prove that their fiscal problems merit an additional explosion of federal debt beyond what the government has already spent on coronavirus on top of the more than $1 trillion in deficit spending scheduled for this fiscal year before the pandemic hit.
“We need to slow down a little bit here, see what works best in the CARES Act, see what mistakes were made, weigh the consequences of having debt this size in terms of the future of our country, and then cautiously make a decision about whether there should be another bill,” said McConnell last week at a press conference.