The Next Big Clash On Capitol Hill: State Bailouts

By Allison Stevens| Susan J. Demas, Michigan Advance

WASHINGTON — State and federal lawmakers alike want Congress to send more cash in the next round of COVID-19 legislation to aid ailing cities and states.

House lawmakers introduced a proposal in early April that would send $250 billion in “stabilization funds” to cities and towns in addition to separate aid for states.

“We’re pushing very hard to help our heroes, our first responders, the folks out on the frontlines in our communities,” U.S. Rep. Andy Levin (D-Bloomfield Twp.), who introduced the House bill, said Thursday on a call with reporters.

Last month, Michigan Gov. Gretchen Whitmer, Wisconsin Gov. Tony Evers and Pennsylvania Gov. Tom Wolf sent a letter to President Trump asking for federal help. Whitmer has estimated that Michigan could face a $7 billion shortfall over the next 18 months due to measures taken to halt the spread of COVID-19. This year’s Fiscal Year 2020 budget is $59.4 billion.

“As the COVID-19 crisis continues, the health of our people and our economies are dependent on your actions in the coming days and weeks,” the governors continued. “We implore you to act decisively and expeditiously during this unprecedented time for our Nation.”

But some high-profile Republicans have bristled at the idea, signaling a coming clash over the issue on Capitol Hill.

The debate comes as state and local governments around the country face massive revenue losses that threaten funding for police, fire departments, emergency responders, schools, trash collectors, food banks, libraries, museums and civic spaces.

U.S. House Speaker Nancy Pelosi (D-Calif.) said Thursday she is considering legislation that would send as much as $1 trillion in federal funds to sustain state and local governments over the next several years.

Last week, a pair of bipartisan senators unveiled a $500 billion “stabilization fund” for cities and states with more than 50,000 people.

GOP claims it’s a ‘blue-state bailout’

President Donald Trump questioned the effort this week and suggested his support may hinge on state and local support for his immigration policies, according to Politico.

“Why should the people and taxpayers of America be bailing out poorly run states … and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help,” he tweeted Monday.

However, massive budget shortfalls are expected to be a problem for red and blue states alike. Many red states, including big ones, like Florida and Texas, depend heavily on the sales tax for revenue. With many retailers shut down or facing huge revenue losses during the COVID-19 crisis, their state budgets are expected to take a hit, too.

U.S. Senate Majority Leader Mitch McConnell (R-Ky.) characterized calls for more federal aid for cities and states as a “blue-state bailout” and said last week he would be open to allowing states to file for bankruptcy. Many conservatives have been eyeing state worker pensions as an area ripe for cuts.

He changed course this week, saying he would be open to such aid in exchange for legal protections for businesses and workers, Politico reported.

Democratic leaders quickly panned the pitch — an indication that the bipartisanship that drove earlier coronavirus packages through Congress is eroding further.

Some Republicans, meanwhile, are voicing strong opposition to the plan.

“There’s more Congress can do,” U.S. Sen. Rick Scott, a Florida Republican, wrote in the Wall Street Journal. “But one thing we absolutely shouldn’t do is shield states from the consequences of their own bad budgetary decisions over the past few decades.”

Other Republicans have expressed concern about deficit spending, noting that Congress has already spent some $3 trillion in response to the pandemic.

In March, Congress set aside $150 billion in its $2.2 trillion coronavirus package to help cities and states respond to the pandemic. The legislation didn’t allow officials to use the funds to plug budget shortfalls and only provided direct aid to municipalities with more than 500,000 people.

Democrats sought additional funding for cities and states in a $484 billion coronavirus package approved last week, but Republicans balked.

The next bill “must include desperately needed funding for state, tribal, and local governments so they can continue to pay frontline public sector workers,” U.S. Rep. Debbie Dingell (D-Dearborn) said Thursday. “This is where the fight is happening. It’s at the grassroots level.”

U.S. Rep. Dean Phillips (D-Minn.) echoed the sentiment. “This is an unforeseen extraordinary circumstance and it’s in the best interest of every state and our nation to support states because defaults are unacceptable for reasons I do believe most understand.”

The Senate is slated to reconvene on Monday, while the U.S. House plans to return the week of May 11.