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Press Release

McConnell’s Determination to Block Red & Blue State Aid Will Cost Jobs, Public Safety, Economic Recovery; Create Depression Level Despair

By December 15, 2020No Comments

Red States Suffering Biggest Revenue Declines

McConnell Insistent on Cutting Funding for Police, Fire-Fighters, First Responders, Health Workers, Schools

Economists Agree State and Local Aid Should Be Top Priority in Relief Bill

State and Local Aid in the CARES Act Proven to Be Effective

Red states are facing the consequences of Senate Majority Leader McConnell’s determination to deprive local governments of coronavirus aid. As McConnell obstructs pandemic relief legislation over funding for state governments, some of those that voted for President Trump and are led by Republican Governors are expected to suffer the biggest revenue declines over the next two years. 

Meanwhile, shoestring budgets are forcing governments across the political spectrum to slash frontline workers and essential departments: Police officers, fire-fighters, teachers, social service workers and more have been laid off as McConnell deprives states of a lifeline. Already weak public health agencies are being forced to fight the pandemic with depleted resources, as transportation departments are delaying critical infrastructure projects. McConnell’s obstruction will have long-term effects on a national economic recovery, and harm frontline workers during one of the worst national crises in modern American history. 

State and Local Governments Are Facing Catastrophic Budget Shortfalls, Risk Depression Level Pain

  • Despite Entering 2020 With $119 Billion In Savings, State And Local Government Budget Shortfalls Could Reach $450 Billion In The Next Year. “After the financial crisis of 2008—a rare instance when collective state revenue fell—many states created new (or supplemented existing) “rainy day” funds. As a result, state and local governments entered 2020 with a combined $119 billion in such savings, according to the Brookings Institution. But the economic slowdown caused by COVID-19 has blown up budgets from coast to coast, and the impact will be lasting. Moody’s Analytics estimates that state and local government budget shortfalls could be a combined $450 billion over the next three years even as the economy recovers. Below, a state-by-state breakdown of the looming deficits.” [Fortune, 12/3/20]
  • A Report By Moody’s Analytics Concluded That Six Of The Seven States Expected To Suffer The Biggest Revenue Declines Over The Next Two Years Are Red States. “But it turns out this budget crisis is colorblind. Six of the seven states that are expected to suffer the biggest revenue declines over the next two years are red — states led by Republican governors and won by President Trump this year, according to a report from Moody’s Analytics.” [New York Times, 12/4/20]
  • Dan White, Director Of Fiscal Policy Research At Moody’s Analytics, Warned That The Fiscal Impact For State And Local Governments “Would Be The Worst Since The Great Depression.” “Even the most optimistic assumptions about the course of the pandemic point to fiscal consequences for states and local governments that ‘would be the worst since the Great Depression’ and take years to dig out of, Dan White, director of fiscal policy research at Moody’s Analytics, concluded.” [New York Times, 12/4/20]
  • Federal Reserve Chair Jerome Powell Warns That Reducing State And Local Spending, Which Accounts For 15 Percent Of The Nation’s Economic Activity, Will Stall An Economic Recovery. “Jerome H. Powell, the chair of the Federal Reserve, and many economists have warned that reducing state and local spending will further drag down a weak recovery, as it did after the Great Recession. Spending by state and local governments accounted for about 15 percent of the nation’s economic activity, according to the Bureau of Economic Analysis, part of the Commerce Department. While the federal government can run budget deficits to cover both regular and unexpected expenses, states generally cannot.”  [New York Times, 12/4/20]
  • Data Compiled By The National Conference Of State Legislatures Concluded That States Are Expected To Slash Spending Anywhere From 5 Percent To 20 Percent. “Though shortfalls today are well below some of the estimates made in the early days of the coronavirus downturn, states are still expected to slash spending anywhere from 5 percent to 20 percent to keep their budgets balanced, according to data compiled by the National Conference of State Legislatures.” [The Hill, 12/10/20]

Economists Agree That State and Local Aid Should Be a Top Priority for Congress, While State and Local Funding in the CARES Was Shown to Be Effective

  • Analysis By The Congressional Budget Office Concluded That Aid For State And Local Governments In The CARES Act Was Spent More Efficiently Than Expanded Unemployment Benefits And The Paycheck Protection Program. “Aid for state and local governments is also viewed as one of the most effective parts of the CARES Act. According to the Congressional Budget Office, the multiplier for such aid reached 0.88, signaling the majority of stimulus dollars allocated to governments were spent efficiently. That compares to multipliers of 0.67 and 0.36 for expanded unemployment benefits and the Paycheck Protection Program, respectively.” [Business Insider, 12/14/20]
  • In A Survey Of Economists Conducted By FiveThirtyEight, 85 Percent Of Respondents Answered That State And Local Aid Should Be Among Legislators’ Top Three Priorities. “Economists have also broadly agreed that state and local government support should be a top priority in future stimulus talks. In a survey of 33 economists conducted by FiveThirtyEight in July, 85% of respondents said that such aid should be among legislators’ top three priorities. More than a third said it should be of greatest importance. ‘The danger is that we repeat those mistakes in this recession, and it would be truly tragic because the federal efforts to get us out of this economic hole have been even larger than they were in the Great Recession,’ Evercore’s Tedeschi said. ‘It would be extra tragic if we let all of that good effort be counteracted by fiscal crises at the state and local level.’” [Business Insider, 12/14/20]
  • Tracy Gordon, Senior Fellow With The Urban-Brookings Tax Policy Center: “The Most Effective Form Of Relief And Stimulus For The Overall Economy Is Flexible Money That States Can Use Depending On Need.” “Economists are warning that a COVID-19 relief bill without aid for state and local governments would mean passing up an opportunity to include a proven stimulus provision. Congressional leaders are at odds over not only the price tag of a new relief measure, but what should be in it. The various proposals on Capitol Hill range from tens of billions of dollars in government aid for states, cities, tribes and territories to no funds at all. ‘The most effective form of relief and stimulus for the overall economy is flexible money that states can use depending on need,’ said Tracy Gordon, senior fellow with the Urban-Brookings Tax Policy Center, which is led by a former Obama administration official.” [The Hill, 12/10/20]

Red and Purple States Will Face Hollowed Out Public Agencies Including Health, Safety, Education and Transportation if Relief Isn’t Delivered

  • Dan Itzen, District Attorney Of Casper, Wyoming, Is Cutting Costs Amid A State Budget Shortfall By Declining To Prosecute Certain Misdemeanors. “In Casper, Wyo., someone from the district attorney’s office walks around the block to the Circuit Court building each week and fetches a large plastic garbage bag full of discarded paper clips to reuse. The brief journey is just one way that the prosecutor, Dan Itzen, is cutting costs. He has also stopped prosecuting 17 types of misdemeanors — including assault and battery, first-time drunken driving, shoplifting, check fraud and property damage. ‘Something had to give,’ said Mr. Itzen, who handles about one-third of Wyoming’s criminal caseload and gets his funding from the state. ‘If I’m losing personnel, I cannot continue to prosecute as many cases.’” [New York Times, 12/4/20]
  • In Kansas City, Missouri, Budget Cuts Could Result In Laying Off 200 Police Officers And 180 Fire Fighters Or Emergency Responders. “In Kansas City, Mo., with a municipal budget of $1.7 billion, the city manager has asked each department to draft a plan for cuts of more than 11 percent. That could mean laying off 200 police officers from the 1,300-member force and 180 firefighters and emergency medical technicians, said Dan Fowler, a City Council member. ‘This is one of the things that keeps me up at night,’ Mr. Fowler said, thinking about the impact on the city’s half a million residents. Such cuts could end up closing one or two police stations, even though crime is rising, he said.”  [New York Times, 12/4/20]
  • New Orleans, Louisiana, Is Asking High-Level Employees To Accept Pay Cuts Of 10 Percent, And Requiring Police Officers And First Responders To Take 26 Unpaid Furlough Days Next Year. “In New Orleans, Democratic city leaders are going through a similarly painful process, shrinking next fiscal year’s general fund by $92 million, down to $634 million. To avoid layoffs, the city is cutting the pay of higher-level employees by 10 percent and requiring most other employees, including police officers, firefighters and emergency responders, to take 26 unpaid furlough days — one every two weeks — next year. The move amounts to a 10 percent pay cut, and comes on top of six furlough days imposed on the city’s roughly 4,000 employees through the end of this year.”  [New York Times, 12/4/20]
  • An Overwhelming Number Of State And Local Job Losses Have Been In Education, As 45 Percent Of Mayors Expect “Dramatic” Cuts To School Budgets. “So far, an overwhelming majority of state and local job losses have been in education. Though many of the layoffs have been characterized as temporary, educators and parents worry that they could become permanent. In a new survey of mayors, 45 percent said they expected “dramatic” cuts for their school budgets. Public schools overwhelmingly rely on property taxes. States often provide additional funding, but many have cut their education budgets.” [New York Times, 12/4/20]
  • Spending Cuts In Missouri Have Hollowed Out The Department Of Social Services, Which Lost 200 Jobs. “The state of Missouri has made its own spending cuts. In June, Gov. Michael Parson cut nearly $440 million in general-fund spending, roughly 4%. About $133 million has since been reinstated. The move eliminated about 300 filled positions. Of those, 200 came from a single agency, the Department of Social Services. And about 80 of those were in the Children’s Division, which handles foster care.” [Wall Street Journal, 11/29/20]
  • 18 States And 25 Localities Have Delayed Transportation And Infrastructure Projects As Budgets Are Stretched. Nationwide, 18 states and 25 localities have recently canceled or delayed transportation ­projects valued at $10.9 billion, according to the American Road & Transportation Builders Association (ARTBA).” [Washington Post, 10/3/20]
    • Transportation Advocates Are Calling On Congress To Provide Pandemic Relief. “Transportation industry advocates are calling on Congress to provide financial aid in a second pandemic relief package. They say transportation systems are key to reviving the economy by helping businesses move freight, employees to return to work, and travelers to spend money.” [Washington Post, 10/3/20]
    • North Carolina’s Department Of Transportation Has Laid Off Half Half Of Its Temporary Employees, And Delayed About 150 Projects During The Crisis. “In North Carolina, the state’s Department of Transportation said it lost $190 million in gas tax proceeds and other revenue between late March and June. It expects to lose an additional $500 million by next summer. In addition to laying off half of its temporary employees and consultants in the spring, the agency delayed about 150 projects, including widening 10 miles of Interstate 95 near Fayetteville. The agency pulled back on more projects in August and September, NCDOT spokesman Andrew Barksdale said.” [Washington Post, 10/3/20]
  • At Least 14 States Cut Health Department Budgets Or Were Considering Such Cuts In June, As Cases Surged And Revenue Tanked. “In most states, the new budget year begins July 1, and furloughs, layoffs and pay freezes have already begun in some places. Tax revenues evaporated during lockdowns, all but ensuring there will be more. At least 14 states have already cut health department budgets or positions or were actively considering such cuts in June, according to a KHN-AP review.” [Kaiser Health News, 8/24/20]

    • Red And Purple States Like Michigan, Pennsylvania, And Tennessee Are Among Those Cutting Their Public Health Forces. “Since the pandemic began, Michigan temporarily cut most of its state health workers’ hours by one-fifth. Pennsylvania required more than 65 of its 1,200 public health workers to go on temporary leave, and others lost their jobs. Knox County, Tennessee, furloughed 26 out of 260 workers for eight weeks.” [Kaiser Health News, 8/24/20]
  • Mike Leachman, Vice President For State Fiscal Policy for Budget and Policy Priorities: “States Will Lay Off More Teachers, Health Care Workers, And Other Public Employees. That’ll Just Make The Pandemic Recession Even Worse. They’ll Cut Services That Businesses Need Right Now.”  “Mike Leachman, vice president for state fiscal policy at the left-leaning Center for Budget and Policy Priorities, estimates states will face a shortfall of between $275 billion and $415 billion through fiscal 2022. ‘What’s at stake is, without additional aid, states will lay off more teachers, health care workers, and other public employees. That’ll just make the pandemic recession even worse. They’ll cut services that businesses need right now,’ he said.” [The Hill, 12/10/20]

State Budgets Were Already Starved of Public Health Funding as They Fought the Worst Pandemic in a Century

  • Spending For State Public Health Departments Has Fallen By 16 Percent Per Capita Since 2010, While Spending For Local Health Departments Has Fallen By 18 Percent. “Since 2010, spending for state public health departments has dropped by 16% per capita and spending for local health departments has fallen by 18%, according to a KHN and Associated Press analysis of government spending on public health. At least 38,000 state and local public health jobs have disappeared since the 2008 recession, leaving a skeletal workforce for what was once viewed as one of the world’s top public health systems.” [Kaiser Health News, 8/24/20]
  • Even As Coronavirus Cases Surged, States And Localities Strapped For Cash Furloughed Members Of Their Public Health Workforce. States, cities and counties in dire straits have begun laying off and furloughing members of already limited staffs, and even more devastation looms, as states reopen and cases surge. Historically, even when money pours in following crises such as Zika and H1N1, it disappears after the emergency subsides. Officials fear the same thing is happening now. ‘We don’t say to the fire department, “Oh, I’m sorry. There were no fires last year, so we’re going to take 30% of your budget away.” That would be crazy, right?’ said Dr. Gianfranco Pezzino, the health officer in Shawnee County, Kansas. ‘But we do that with public health, day in and day out.’”  [Kaiser Health News, 8/24/20]
  • More Than Three-Quarters Of Americans Live In States That Spend Less Than $100 Per Person Annually On Public Health. “More than three-quarters of Americans live in states that spend less than $100 per person annually on public health. Spending ranges from $32 in Louisiana to $263 in Delaware, according to data provided to KHN and AP by the State Health Expenditure Dataset project. That money represents less than 1.5% of most states’ total spending, with half of it passed down to local health departments.” [Kaiser Health News, 8/24/20]