The United States recently experienced an uptick in the number of COVID-19 cases. This, coupled with former Vice President Biden’s presumed election victory, has many people pondering about the possibility of additional federal stimulus to state and local governments. This week, Alan Greenblatt wrote about the issue for Governing. He writes:
State and local officials continue to sound the alarm about budgets. Collectively, they face shortfalls through 2022 in the neighborhood of $1 trillion – an estimated $434 billion among states; $360 billion for cities; and $202 billion for counties.
States now face their biggest cash flow problem since the Great Depression of the 1930s. The Brookings Institution projects that state and local income tax revenues, for example, will decline by five percent this year, 7.5 percent next year and eight percent in 2022. Revenue declines, in other words, are going to be a multiyear issue.
However, things may not be as dire as they appear. Greenblatt quotes the John Locke Foundation’s Joe Coletti, writing:
Some Republicans have noted that the falloff in state revenues has not been as calamitous as projected back in the spring. “If you take a look at the revenue picture for most states from April through September, it’s not far off from where it was last year,” says Joe Coletti, a senior fellow at the John Locke Foundation, a free-market think tank in North Carolina.
It is unclear, however, how things will shake out in the future. Further shutdowns or reversals on reopening plans could throw the economy into further disarray. Another stimulus package, Greenblatt suggests, could mitigate the economic harm of these measures, but conservative lawmakers are hesitant to put another relief package on the table, as they believe it would place a burden on the entire country to bailout a handful of fiscally irresponsible citites and states. Greenblatt writes:
But Republicans – including many state legislators and governors – maintain that blue states are seeking a bailout after mismanaging pensions and other programs. “There’s a fairness issue,” says Utah GOP Gov. Gary Herbert. “Some states need it and some states don’t need it, so does that mean we give more money to those who’ve been less fiscally prudent?”
While some were expecting a second stimulus package before the election, that never panned out. And political expectations of Democrats performing better in the election than they actually did might have led to some bungled decisions on the left’s behalf. Greenblatt writes:
In retrospect, House Speaker Nancy Pelosi may have misplayed her hand in the expectation that Democrats would win unified control in Washington. Last month, Treasury Secretary Steven Mnuchin was open to the idea of as much as $300 billion in state and local aid, but they couldn’t come to agreement.