Unlike the federal government, states can't print money. And many are constitutionally unable to run deficits. You know what they means in the Trump Recession/Depression? Cutbacks inlays that will hurt the already hard-hit working class. And The GOP is doing all it can to make matters worse. It's their thing-- and the media calls it a political deadlock, as Mary Walsh did in a NY Times article yesterday. One of America's biggest statewide socialist programs is in Alaska-- the Permanent Fund (established in 1976), which basically pays every citizen in the state a Basic Income through a divided on oil revenues. In 2015, the dividend was $2,072. Since Trump became president it's been going down-- $1,606 in 2019, $992 this year and is estimated to be going to zero by October. Walsh didn't mention it and wrote that "Alaska chopped resources for public broadcasting. New York City gutted a nascent composting program that could have kept tons of food waste out of landfills. New Jersey postponed property-tax relief payments. Prisoners in Florida will continue to swelter in their cells, because plans to air-condition its prisons are on hold. Many states have already cut planned raises for teachers. And that’s just the start."
I doubt many conservatives are going to lose their seats because Florida prison inmates don't get A/C or because of a composting program or a cutback in public broadcasting. But watch what happens in Alaska when people there figure out they're not getting their dividend checks. And, wrote Walsh. "Across the nation, states and cities have made an array of fiscal maneuvers to stay solvent and are planning more in case Congress can’t agree on a fiscal relief package after the August recess. House Democrats included nearly $1 billion in state and local aid in the relief bill they passed in May, but the Senate majority leader, Mitch McConnell of Kentucky, has said he doesn’t want to hand out a 'blank check' to pay for what he considers fiscal mismanagement, including the enormous public-pension obligations some states have accrued. There has been little movement in that stalemate lately.
Economists warn that further state spending reductions could prolong the downturn by shaking the confidence of residents, whose day-to-day lives depend heavily on state and local services.
“People look to government as their backstop when things are completely falling apart,” said Mark Zandi, chief economist at Moody’s Analytics. “If they feel like there’s no support there, they lose faith and they run for the bunker and pull back on everything.”
States and municipalities are also crucial employers and spenders that keep the economy moving. “We run the risk of descending into a dark vicious cycle,” Mr. Zandi said.
State and local governments administer most of America’s programs for education, public safety, health care and unemployment insurance. They also provide a wide variety of smaller services, such as outdoor recreational facilities or highway rest stops, that improve the quality of life. The costs of many of these programs have spiraled because of the pandemic, which has at the same time caused an economic slump that has driven down tax revenues.
Collectively, state governments will have budget shortfalls of $312 billion through the summer of 2022, according to a review by Moody’s Analytics. When local governments are factored in, the shortfall rises to $500 billion. That estimate assumes the pandemic doesn’t get worse.
When the lockdowns started in March, state and local governments quickly cut 1.3 million jobs. But then they paused, waiting to see if revenue would continue to fall-- and what Washington might do to replace it.
Lawmakers soon passed the $2 trillion CARES Act, which authorized one-time stimulus payments and temporary supplemental unemployment payments, which buoyed consumer spending and helped states’ sales-tax revenues. The law also allocated about $150 billion to states for expenses directly attributable to the pandemic, in areas ranging from education and health care to the operation of nearly empty airports. But the rules for what expenses that money can cover have kept much of it from being spent, according to the Treasury Department. New York State, for example, has been sent about $2.9 billion that it can’t put toward other uses.
Although states’ budget challenges would be eased if Congress relaxed those rules, that still wouldn’t be enough to fill the gap.
Gov. Andrew M. Cuomo has warned that without further relief New York will cut $8.2 billion in grants to local governments, a blow he said had “no precedent in modern times.” The cuts would hit “nearly every activity funded by state government,” including special education, pediatric health care, substance abuse programs, property-tax relief and mass transit, he said.
No two states have tackled the budget crunch the same way. Several have torn up their annual budgets and are doling out money to programs one or two months at a time. Some have earmarked cuts but not yet carried them out.
Delaware has decided to issue less debt, and a bond issue that was supposed to fund clean-water projects has been shelved. In California, people who go to court without lawyers-- an estimated 4.3 million a year-- will continue to deal with confusion because the state has scrapped plans for “court navigators” to shepherd them through. Nevada said it would forgo the penalties and interest it normally charged tax cheats, hoping to coax them and their unpaid millions up from underground. In Maryland, the Baltimore Symphony Orchestra will lose a $1.6 million state subsidy.
Some states are trying to save cash on their pension contributions. Kentucky has delayed its payments to the state workers’ pension fund, already one of the most poorly funded in the country. Colorado and Maryland are among the states planning to reduce their contributions. Some, like California and New Jersey, had recently committed to raising their contributions to cover past underpayments-- but now can’t afford to do so.
Without further federal aid, some of the biggest cuts will be to education and health care. California says it will send its school districts $12.5 billion in I.O.U.s if Washington doesn’t step in, and it will be on the schools to figure out how to fund themselves in the meantime. Preschool programs are being cut in many states; so are free-tuition college programs. State university systems are slated to lose billions of dollars in state funding, although some states say the cuts will be quickly reversed if enough federal money arrives.
And many states say they will reduce their outlays for Medicaid. The health care program for low-income people has been growing rapidly in the pandemic as millions have lost their jobs along with their employee health benefits. States are struggling to find a way to pay for all these additional people. Some, like Colorado, are increasing the co-payments that their Medicaid patients must pay for doctor visits, pharmaceuticals and medical transport.
State officials say they have little choice but to keep cutting if more aid doesn’t arrive. All but one state, Vermont, are legally bound to balance their budgets every year, and Vermont does so voluntarily. They can’t borrow their way out of a cash crunch, the way Washington can, because they have laws limiting how much bond debt they can carry. If they veer too close to the limit, lenders will start demanding higher interest rates and the rating agencies will downgrade them.
In May, the Federal Reserve offered to buy states’ bonds if terms in the municipal bond market become onerous. But most states think the Fed loans cost too much and have to be paid back too quickly to be of much help. So far only one state, Illinois, and one state authority, New York’s Metropolitan Transportation Authority, have taken the Fed up on its offer. New Jersey and Hawaii are exploring deals, according to the National Conference of State Legislatures, which tracks the states’ fiscal plans as they develop.
Public pensions have been a central point of contention in discussions over additional federal aid.
In April, with economic activity at low ebb, Illinois lawmakers sent a detailed wish list to their state’s congressional delegation that included $10 billion for the coming year’s pension contribution. They also asked for $9.6 billion for Illinois’s cities, which needed the money to “fund retirement systems for the police, firefighters and other first responders providing emergency services during this Covid-19 outbreak.”
The request drew scorn in Washington.
On a syndicated radio show, Mr. McConnell said Senate Republicans would “certainly insist that anything we’d borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs.”
Glenn Hubbard, an economic conservative who was chairman of the Council of Economic Advisers under President George W. Bush, said he agreed that federal money should not be used to prop up failing state pension funds. But he acknowledged that the states’ cash needs were becoming urgent and said there wasn’t time for a complete overhaul of troubled state pension systems.
For the sake of speed, Mr. Hubbard said in an interview, Congress could send the states money with a simple, and probably breakable, rule that it not be used to reduce taxes or bail out pensions. Public pension reform, which would be grueling, could come later.
Or, as Mr. Hubbard said in an online seminar hosted by the Economic Policy Institute last month, “if an overweight person comes to the E.R. with a heart attack, you treat the heart attack before you lecture him or her about weight.”
I spoke with some of the state legislative candidates Blue America has endorsed about how this catastrophe is playing out in their own districts and in their own campaigns. Southwest Milwaukee County challenger Jacob Malinowski, a working class candidate through and through, told me that "In Wisconsin, we’re seeing the direct effects of economic mismanagement for partisan gain. The dark store loophole-- which means mega-corporations avoid paying their fair share in property taxes-- bankrupts municipalities and leads to higher taxes for working people. Wisconsin is now one of only a few states which still hasn’t accepted the free federal Medicaid expansion dollars. This means that all of our healthcare costs go up-- just for some sort of twisted, ideological political victory. And finally, throughout most of 2020, our state legislature hasn’t even shown up for work. No debates, no bills-- but still their full salary. Enough is enough, and I’m running because we need more advocates for working and middle class families-- not wealthy billionaires."
Tulare Democrat Drew Phelps is running for a seat against Devon Mathis, arguably the worst member of the California state legislature. He told this morning that he's thankful that "California didn't have to layoff public employees this year," but was horrified that "most public workers will be seeing a pay cut of 9.23% under agreements made for next year's budget. This would be reversed if the federal government stepped in to help restore the state budget. That 9.23% represents $2.8 billion per year that is being taken away from public employees and will also no doubt represent a reduction in spending by those families that are impacted, further hurting California's economy. It was a necessary step for a state that is bound by the constitution to pass a balanced budget, but incredibly short sighted from a federal government not bound by the same constraints in a time of crisis. Some California lawmakers made written requests that their salary be cut to match the sacrifice being made by so many California state employees, but my opponent Assemblymember Devon Mathis made no such gesture."
Aside from Lee Carter, also from Virginia, Delegate Patrick Hope is the only one of our state legislative candidates who is an incumbent. He speaks from experience when he tells us that "Trump and McConnell’s failure to lead during the pandemic means that states, such as Virginia, have to cut basic core services in order to balance their budgets. Virginia is projecting a whopping $2.7 billion shortfall over the next two years leaving legislators no other choice but to make deep cuts in Medicaid programs, public education, and infrastructure. That means government support won’t be there for low-income families at a time when they need it the most. What’s just as bad is states are on their own securing virus testing and PPP, just when schools are preparing to open all over the country. The Trump Administration and Republicans in Congress have proven themselves to be unreliable when it comes to securing the basic necessities for states to fight the pandemic. At a time when the need for federal financial support to the states is at its greatest, we get nothing but broken promises. And who’s left holding the bag: the people."
Deb Lavender is a member of the Missouri House-- currently running for the state Senate-- so, like Patrick Hope, she speaks from experience about the conservative embrace of austerity-- or at least for austerity for the working class. She told me that "Over the last decade Missouri has cut taxes for large corporations, costing the state $750 million in yearly revenue. This cut in revenue to our state has forced budget cuts at a time when the economy was doing well, from 2015 thru 2019. And this is after austerity measures were taken following the recession in 2008 – 2012. Missouri has the lowest gas tax in the nation so there is no surprise when we have over 900 bridges on the critical and emergency repair list. Last year we borrowed $300 million to fix these bridges during an economic boom because we refused to raise gasoline taxes and continue to cut corporate taxes. Missouri has one of the lowest cigarette taxes in the nation, and we are one of two states that have not capitalized on the Wayfair sales tax. As a state, Missouri has not been investing in our citizens for close to a decade. We fail to fund public education, higher education, and we have not expanded Medicaid expansion so our low-income friends, neighbors and families to have to affordable healthcare. Due to corporate budget cuts we have had austere budgets for the last 5 years and then the coronavirus hit. Since March our Governor has cut over $800 Million from our budget while continuing to mismanage our tax dollars. We have billions of federal dollars from the CARES Act still not being spent, and the latest development from Missouri is our Governor's $829,000 in payments to a Virginia-based consulting company to help us spend our CARES act money. Tens of thousands of Missourians are still unemployed, over 1 million people in the state don’t have access to broadband, schools and hospitals don't have enough PPE, and the state has not taken measures to ensure everyone can safely vote in November, and we are sending our money to Virginia? Whether for good or bad, state government plays a powerful role in the lives of every person living in our state. Missouri needs to start investing in the people of the state to becomes a viable state where people want to live."
Down in Miami-Dade, Bob Lynch, is running hard for a swing district seat currently held by rot-gut Republican Daniel Perez (HD-116). Yesterday, he told me that "One of the things that attracts people like Donald Trump and Kayleigh McEnany to the state of Florida is the fact that we have no state income tax. When the good times roll, this is a big selling point. However, Ron DeSantis has torpedoed our state’s economy due to ignoring the public health component of the pandemic. All he cares about is letting his donors open up their businesses regardless of how unsafe it is. The 2021 State Budget that was jammed through at the last minute will be something that historians will study due to the brazen criminal negligence involved. The revenue assumptions in the budget were pre-COVID, despite it being passed in the middle of the pandemic. I have long since tangled with Moody’s on their rose colored glasses loss estimates, dating back to my time as a Subprime Mortgage trader. They estimate that Florida will have an $8-10 billion dollar budget shortfall. I have, and will always take the over on any Moody’s report. Ron DeSantis, Rick Scott, and Marco Rubio have been adamant about the federal government not bailing out reckless states. Florida is the most reckless state. The essential services that will have to be cut simply to balance the budget is something that Paul Ryan and Rand Paul’s wet dreams are made of. This is an impending disaster, which was the intention. Sabotage the government and then blame the government. I’m getting sick of watching this movie over and over."
Anselm Weber is also running for the state House, but west of where Bob is running, in Lee County. He wrote this morning that "the GOP has been immensely successful for the last 40+ years gaslighting the public into believing policies that directly benefit the public are somehow bad. A lot of their narrative successes could have been avoided if the Democrats put effort into defending our social safety net and policy prescriptions like single-payer healthcare and a living wage. If the Democrats put opposition up in my state of Florida things might actually be better for the working class. Right now millions of Floridians are without healthcare, affordable housing or a living wage. This has only gotten demonstrably worse with the GOP's austerity-driven approach to COVID-19 with a jaw dropping 51% of renters at risk for eviction. On top of that, 1.7 million people still have not had their unemployment claims processed! The need to rebuild our social safety net here is my top priority if elected. No longer should we accept the pay-as-you-go logic of the far right. Not when millions of people are ending up in poverty because of COVID-19 and soon to be climate change. Now is the time to call out the right's trash narrative gatekeeping the public goods we all need."
Joshua Hicks is running for state House clear on the other end of the state-- in Nassau and Duval counties. "State aid is vitally important to Northeast Florida and across the country. My opponent has joined his Republican colleagues in blocking Medicaid expansion in Florida-- funding which would place 800,000 low-income and needy Floridians on healthcare. In times of an economic crisis, like we are going through now due to the pandemic, we need leaders who will place the people and their communities first-- not political talking points or economic policies that only look out for themselves and not the people they represent. We need leaders who will support local communities and who will stand up for our workers, fighting for pay increases and expanded benefits. While Republicans in Washington stand up against supporting states in need, their colleagues in state legislatures are supporting their blockade-- at the cost of hard working Americans. That's simply wrong policy. As a state legislator, I'll fight for our workers, for the low-and-middle class families in need, for our small businesses, and will look for ways to lift up, not put down, our local communities. If we need help from the federal government, I'll happily work to accept it if it helps my district-- regardless of the consequences. That's leadership. The election this November gives us a real chance to change the direction of this nation-- from the bottom on up."
Labels: 2020 legislative elections, Alaska, anselm Weber, Bob Lynch, COVID Economy, Drew Phelps, Malinowski, Patrick Hope, Trump Recession
In a message to her supporters yesterday, Marie Newman wrote that she has "come to expect carelessness and cruelty from the Trump Administration, but this level of disregard for Americans’ pain is truly astounding. Millions are out of work and many more will lose their jobs, and even lose their lives, without the economic relief our country desperately needs and deserves. I’ve spent the past five months meeting with community members, small business owners, and first responders across Illinois’ Third District. They desperately need relief. Now. Working families need additional federal support as they struggle to find work and keep food on the table, small businesses need continued relief to stay afloat and pay their employees, and states and municipalities need immediate assistance to continue providing essential public services. Trump and his allies in Congress see these negotiations as a political game, but in reality, American lives are on the line. I’ve had enough with politicians who ignore the needs of their constituents. Vote them out."
