After presiding over 3.5 iterations of federal economic stimulus legislations, collectively referred to as the Coronavirus Aid, Relief, and Economic Security (CARES) Act, pursuant to which Congress gave away a total of $2.7 trillion in federal funds, primarily to the business and health sectors, Senate Majority Leader Mitch McConnell has suffered a sudden attack of concern over the impact of the economic stimulus on the federal deficit. Senator McConnell’s pearl-clutching deficit epiphany arrived just as many members of Congress urged him to address the financial impact of our economic freefall on state and local governments (particularly small ones) across the country.
In interviews on April 22, Senator McConnell stated that “we haven’t had much discussion about adding $2.7 trillion to the national debt,” that “we’re going to hit the pause button here, because I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” that “we’re not ready to just send a blank check down to states and local governments to spend any way they choose to,” and that “[t]here’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations.” He also suggested that he would prefer to allow states to file for bankruptcy, rather than provide them with additional federal financial assistance. What on earth is the Senator thinking?
As I write this, we are 56 days into coronavirus pandemic management, and, aside from emergency health providers and grocery, drug and liquor stores, New York and many other states are pretty much closed for business. Nationwide, unemployment benefit claims have topped 22 million, and our consumer-based economy is in freefall. People have nowhere to spend money, even assuming they had money to spend. The sales tax, casino revenues, mortgage recording tax, and other miscellaneous taxes and fees that fund local government have declined drastically, as has the flow of state aid as states find themselves fiscally challenged by the pandemic. State and local governments are experiencing catastrophic revenue losses and the expenses of meeting drastically increased local needs as a result of coronavirus, and not because of poor fiscal management. This is not about bailing out public employee’s pensions; it’s about keeping employees to provide necessary public services.
As our national economy struggles to recover, it makes sense to fund businesses, large and small. But businesses exist within and depend upon a complex system of infrastructures, both visible and invisible. Streets, roads, utilities, public transit, a public health system, police and firefighters, our court systems, the enforcement of rules and regulations that protect property rights, businesses, employees – all of these, and more, are maintained or regulated, staffed and paid for by state and local government. The business sector simply cannot function efficiently in the absence of these systems. In other words, there can be no stable economic recovery in the absence of fully functioning and funded state and local governments. Senator McConnell’s apparent refusal to acknowledge state and local governments’ role in our national recovery is, at best, short-sighted.
Why should this matter to you? CARES 3.5 was delayed because Democratic Congressional leaders proposed to add funding for state and local governments, funding that would have meant billions of badly needed dollars for New York State and its counties and municipalities. The proposed funding would have included $9 million for Tompkins County, almost $7 million for the City of Ithaca, another million for the Town of Ithaca, and around $2.8 million for the other towns and villages in our county. Think about the difference almost $20 million in funding would make to our county’s economic recovery under the current fiscal circumstances. The County is struggling to adjust its 2020 budget and plan its 2021 budget to meet dramatically increased needs even as the State budget allows the Governor to cut aid and reimbursement programs “as needed” on April 31, June 30 and Dec. 31. The City of Ithaca is contemplating a furlough of up to 25% of its staff. Towns and Villages around the county are trying to determine which employees to furlough and which public works projects to put on hold. That $20 million would go a long way towards keeping our public employees working for all of us, providing a healthy and stable environment in which local businesses could recover. (On the other hand, think about the impact of state and/or municipal bankruptcies on consumer confidence in an economy already on life support!)
We can expect that CARES 4—another proposed funding bill for state and local governments—will be the subject of much debate when Congress returns to Washington on May 5. This time, however, Senator McConnell and company seem poised to be all “prudent” and hawkish about the Federal deficit they effectively ignored the first 3.5 times around. We here in Tompkins County are fortunate to have Congressional and Senate representatives that have taken a firm public position on the need for support of state and local governments, but it wouldn’t hurt if we all took the opportunity to let Senator Schumer and Representative Reed know that we appreciate their support on this issue. And, while we’re at it, we might also want to contact Senator McConnell and ask him what on earth he’s thinking.