Former chair of the Council on Economic Advisers Jason Furman explains: “States also had unusually high spending needs last year and this year. A full accounting for policy purposes needs to include their rainy day funds, saving from furloughs, previous transfers and set these against the revenue losses and additional spending needs.”
The problem is even greater than that. Considering that lack of in-person schooling has set many students back, especially those already at an education deficit, it is not unreasonable for states to seek summer school, year-round school or tutoring. How are they going to pay for that? In other words, the cost of making states and their residents “whole” is more than the gap between revenue and expenditures.
Conservative economist Michael R. Strain from the American Enterprise Institute also points out that averaging states’ revenue misses acute needs: “Hawaii, Nevada and Florida — all heavily dependent on tourism — are down 13.6%, 13% and 7.9%, respectively,” he writes. He adds that “public-sector employment hasn’t recovered. There are 1.3 million fewer state and local government employees than when the pandemic began. ... What matters for the overall national recovery is employment, not tax revenue, and state and local governments are major employers who haven’t come close to recovering.” (Strain argues the bill could include less than $350 billion, but says the states “do need more than nothing.”
If Republican senators think local and state finances are fine, they should talk to their home-state mayors and governors. President Biden and his senior advisers have been doing so, and they tell a different story about their finances than do Republican senators. Last week, Biden addressed the bipartisan National Governors Association. The Post reported that “individual Republican governors have spoken up to back Biden’s relief plan, which can be enacted without GOP support. That includes moderates such as Maryland’s Larry Hogan, as well as Trump-aligned conservatives such as West Virginia’s Jim Justice, who has urged Congress to ‘go big.’”
More than 400 Democrats and Republicans from the United States Conference of Mayors are also behind the bill. Consider Ohio, whose Republican senator, Rob Portman, is among those grousing about state and local aid. He might check his mail. Last month, the Ohio Mayors Alliance sent a letter to the Ohio congressional delegation, explaining: “Many of our cities have furloughed workers, shrunk their workforce through attrition, cancelled police and fire recruitment efforts, and frozen capital budgets that build community infrastructure — all while absorbing additional expenses to respond to COVID, delivering essential services, and reaching out to our communities that have been disproportionately affected.” They added, “It is also important to note that the CARES Act relief provided last year for COVID-related expenses was helpful, but it will not address the challenges ahead for our communities. Furthermore, these funds could not be used to address revenue impacts and, until the last days of 2020, they were required to be utilized before the end of the last calendar year.”
The only Republican plan on the table has nothing for state and local funding. If Portman and others want some bipartisanship, they might try putting real money on the table. The governors and mayors back home would certainly appreciate it.