President Donald Trump and U.S. Senate Majority Leader Mitch McConnell have questioned whether the federal government should provide aid to state and local governments that are facing massive fiscal problems as they grapple with the COVID-19 crisis, dimming the hopes of governors and mayors who have asked Congress and the White House for financial lifelines.
Writing on Twitter on Monday, Trump again left the door open to such aid, but expressed skepticism.
“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? I am open to discussing anything, but just asking?” the president wrote.
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? I am open to discussing anything, but just asking?
— Donald J. Trump (@realDonaldTrump) April 27, 2020
Trump’s tweet followed McConnell’s comments from last week in which the Kentucky Republican threw cold water on the likelihood that the GOP-controlled Senate will approve aid to state and local governments. McConnell’s office released a memo dubbing such aid to be “blue state bailouts,” and in an interview with conservative radio host Hugh Hewitt, McConnell suggested that instead of pinning their hopes on federal aid, states should be allowed to seek bankruptcy protections.
In an April 22 interview with Hewitt, McConnell noted that several American cities have used bankruptcy protections in the past, and said he would support allowing states to do the same. He said the financial problems facing some states are the result of unchecked pension problems.
Of course, McConnell and Trump’s comments don’t take into account that many Republican-run states have also asked for federal aid, including Arizona.
In March, Gov. Doug Ducey and 20 other Republican governors signed a letter to congressional leaders in both chambers, including McConnell, asking for Congress to approve block grants to the states.
“COVID-19 has put an unprecedented burden on state governments. States are spending heavily on the response to the virus at a time when many are at the end of their budget year and revenues are down because of the limited economic activity. A block grant to each state would provide the certainty we need to continue providing critical services at a high level when they are needed more than ever,” the governors wrote in a letter to McConnell, Senate Minority Leader Chuck Schumer, House Speaker Nancy Pelosi and House Minority Leader Kevin McCarthy.
Ducey spokesman Patrick Ptak wouldn’t directly say whether the governor hopes to see federal aid to Arizona and other states, suggesting that Ariona could use more resources but also expressing optimism that the state is in a good position to weather the economic downturn and the likely budget crisis it will bring.
“This situation is unprecedented. First and foremost, the governor wants to make sure we have the resources to address the public health crisis and preserve the social safety net for Arizonans. We’re always going to seek flexibility from the federal government. Luckily Arizona is prepared because we’ve been fiscally responsible and saved for a rainy day,” Ptak said.
In last year’s budget negotiations, Ducey refused to budge on his demand that the state more than double the size of its budget stabilization fund, more commonly known as the rainy day fund. As a result, the rainy day fund now stands at $1 billion.
A spokeswoman for Republican U.S. Sen. Martha McSally did not return emails asking whether she supports aid to the states, and whether she agrees with McConnell and Trump’s comments on the issue. McSally’s office declined to comment last week to The Arizona Republic on McConnell’s statements.
Democratic U.S. Sen. Kyrsten Sinema issued a press statement April 23 criticizing McConnell’s comments on states issuing bankruptcy, though she didn’t mention the Senate majority leader by name.
“Partisan politics in Washington shouldn’t put responsible states like Arizona – or our cities, towns, or counties that operate on shoestring budgets – at risk of bankruptcy. Declaring bankruptcy would mean cuts to firefighters, police, health services, and job and business opportunities. We have bipartisan support in the Senate for revenue-replacement to keep our states, counties, and cities strong and thriving,” Sinema said.
Tom Belshe, executive director of the League of Arizona Cities and Towns, a group that lobbies on behalf of most Arizona municipalities, is holding out hope that the next coronavirus relief package will include funding for state and local governments. Many cities are facing budget crises and are looking at layoffs and furloughs as a way to cope. With federal funding, Belshe said cities could invest in things like infrastructure and public safety.
“There is money out there to cover COVID expenses. But that’s not the only issue that we have. Our budgets are not devastated because of COVID-related expenses. They’re devastated because of the tax revenue that we’re losing,” Belshe said.
The League and various mayors have been communicating with McSally and Sinema’s offices, along with others in Arizona’s congressional delegation. Belshe said he’s not sure what McSally’s position is on federal aid to state and local governments, but “she is recognizing the issue.” McSally has told the League that such funding is likely to come in the next COVID-19 relief bill, he said.
Belshe said the League has also been in touch with the Ducey administration and is hopeful it can partner with Ducey on the issue, but hasn’t yet gotten any commitments from the governor’s office.
The U.S. House of Representatives last week approved a $484 billion relief bill, the fourth massive spending package intended to help Americans cope with the effects of the ongoing coronavirus pandemic. The bill included $310 to replenish funding for the Paycheck Protection Program, which provides relief for small businesses, and $75 million for hospitals and health care providers.
But the bill included no aid for state and local governments. Democratic lawmakers pledged to take up the issue.
The National Governors Association has asked congressional leaders for direct COVID-19 aid to the states. The association’s president, Maryland Gov. Larry Hogan, a Republican, and its vice president, New York Gov. Andrew Cuomo, a Democrat, penned a letter to McConnell, Pelosi, Schumer and McCarthy on April 21 asking for $500 billion in direct aid to states and territories.
For Arizona, federal assistance could be a difference-maker when lawmakers convene to tackle a projected budget deficit that could be as high as $1.6 billion for the upcoming fiscal year.
Legislative budget analysts warned earlier in April that the $1 billion budget surplus the state was expecting just a couple months ago is now likely to be a $1.1 billion deficit. That estimate could be off by a half million dollars in either direction, according to the Finance Advisory Committee.