States Aren’t Getting a Federal Coronavirus Bailout. Most Will Be Fine.
State and local governments hoping for a federal bailout are likely to be on their own for the foreseeable future. Congress failed to reach an agreement this week on another round of coronavirus spending.
After weeks of negotiations over the next coronavirus package, the Senate voted down a so-called “skinny stimulus” bill on Thursday. Sen. Rand Paul (R–Ky.) and Senate Democrats blocked the bill’s advance—though they did so for very different reasons. Paul opposes additional emergency spending because the federal budget deficit is nearing an all-time high, while Democrats want to see yet more spending along the lines of the $3 trillion package the House passed earlier this summer.
Even if it had passed, the Republican-backed $500 billion “skinny stimulus” notably did not include the $1 trillion for cash-strapped states and cities that the House endorsed.
Without that aid on the horizon, some are warning of budgetary catastrophes. The New York Times warned this week of a “dire fiscal crisis” facing some states, declaring in the first paragraph that “Alaska chopped resources for public broadcasting” and that “New York City gutted a nascent composting program that could have kept tons of food waste out of landfills.” Many states have canceled planned pay raises for teachers and other public officials too, the Times notes.
That doesn’t sound like a crisis. It sounds like states are recognizing that falling tax revenue means they will be unable to spend as much as they’d originally planned in the next year or two. In other words, they are doing the important work of budgeting and setting priorities—work that Congress, with its nearly unlimited credit card, refuses to do.
While every state is different, the overall picture for state budgets looks less pessimistic now than it did a few months ago. In April, Moody’s projected that the 50 states were facin
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