MUCH OF the financial burden of dealing with the coronavirus has fallen on state and local governments, with significant aid from Washington to cover unbudgeted direct, disease-related costs — but no general aid to offset revenue losses. There have been about 1 million public-sector layoffs, concentrated in education, which also reflects school closings. Throughout the election year of 2020, Republicans objected to general aid as a “blue state bailout” and used that slogan to raise campaign funds. This divisive canard ignored the fact that most states had been building reserves prior to the pandemic but lost tax revenue due not to mismanagement but an overwhelming health and economic shock that struck red and blue states alike. The hardest hit included those reliant on tourism (red Florida), oil production (red Texas) or both (red Louisiana).

President Biden’s call for $350 billion for state and local governments thus comports with his call for national unity. There are, however, legitimate issues with the proposal, in light of two realities: The first is precisely the widely varying fortunes of the states, whose average revenue loss was 3.3 percent between March and November of 2020, compared with the same period in 2019, according to data provided to us by the Urban Institute. (The states’ revenues through June are projected to fall 10.8 percent short of pre-pandemic plans, according to a December report by the National Association of State Budget Officers.) Eighteen states’ revenues are either flat or up; seven lost 2 percent or less. After updating for revenue through December, California, by far the most populous state, reported a flood of cash from wealthy taxpayers so large that it now has a $34 billion surplus, $22 billion of which will be placed in reserves.

As these admittedly sketchy numbers imply, the second reality is that state revenue loss, though significant, has been smaller than feared in the early days of the pandemic. One reason is that lower-paid workers who generally do not pay income taxes bore the brunt of layoffs, while upper-income citizens kept their paychecks and reaped capital gains in an unexpectedly booming stock market.

Congress should account for these facts, both in determining the ultimate size of the aid package and in establishing a formula for distributing it. Past state and local aid tied to pandemic needs went out in $1.25 billion minimum chunks to each state, with the balance divvied up according to state population. Now we have better information about the various states’ true needs; legislation can and should target aid where it’s most needed, based on states’ coronavirus caseloads and unemployment rates — and their revenue-raising performance. Lawmakers should endeavor as well to guarantee that more funds reach smaller localities; previous pandemic-related legislation only set aside a share of state dollars for cities and counties encompassing a half-million in population or more. The District should get the same share as it would if it were a state.

If Republicans and Democrats want to unite the country and put red-state/blue-state hostility behind them, devising a sufficient, realistically targeted, state and local aid package would be a very good place to start.

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