GOP lawmakers, ALEC urge feds not to “bail out” states

Several Republican lawmakers from Arizona are urging the federal government not to provide funding to states and cities that are coping with the economic consequences of the COVID-19 pandemic, even as Arizona faces a projected budget deficit of more than a billion dollars.

In a letter from the American Legislative Exchange Council, a conservative advocacy group famous for pairing up lawmakers and interest groups to draft model legislation that’s introduced at state houses across the country, GOP lawmakers from around the United States implored federal leaders not to “bail out” states.

The letter, which ALEC released on Tuesday, argues that “bailing out” the states would be “harmful to taxpayers, federalism, and ultimately the states themselves.” The lawmakers noted that Congress has already passed $225 billion worth of relief packages related to the coronavirus. And the national debt is now up to $24 trillion, the lawmakers said, up from $10 trillion in 2009, when the federal government passed a massive stimulus program for states dealing with the Great Recession.

The lawmakers claim a federal bailout would reward states that have made poor financial decisions at the expense of others that have been more fiscally responsible. North Carolina, they noted, has amassed nearly $1.2 billion in its rainy day fund and $3.9 billion in its unemployment trust fund after paying off $3 billion in debt. Meanwhile, Illinois has $486 billion in debt and unfunded liabilities, and its rainy day fund “would only keep the state running for about 15 minutes.”

“While the economy has produced record revenues in recent years, sadly, states have also continued to accumulate massive amounts of debt and unfunded financial liabilities. A federal bailout would only encourage this cycle of debt and spending to continue. It would also send the wrong message to states that have made difficult spending choices and practiced fiscal discipline,” the ALEC letter read.

But the letter was signed by lawmakers from many states that are facing severe revenue decreases due to the COVID-19 outbreak and subsequent lockdown and economic downturn. That list includes Arizona, where the Joint Legislative Budget Committee is projecting a $1.1 billion budget deficit for the upcoming fiscal year, give or take $500 million in either direction. 

Arizona has about $1 billion in its rainy day fund, but also has around $920 million in unpaid rollovers in its K-12 education budget.

North Carolina, which the lawmakers cited as a fiscal responsibility success story, is expected to face a budget deficit of $3 to $4 billion.

According to the Center on Budget and Policy Priorities, a progressive think tank, 22 states and the District of Columbia have readjusted their revenue estimates for the fiscal year 2021, which begins on July 1, to account for the economic downturn. 

Seven Republican lawmakers from Arizona signed the letter: Sens. Sylvia Allen, Rick Gray, Vince Leach and David Livingston, and Reps. Walt Blackman, Shawnna Bolick and Bret Roberts. 

President Trump and congressional leaders are considering an aid package for state governments, possibly contingent on states enacting legislation protecting businesses that reopen from COVID-related lawsuits.