Many of you have joined us in our federal advocacy led by our national office. Some key issues have included equal treatment in health care, federal financials rebates, and caregiver support both financial and protective.
This advocacy always includes support to states to manage this crisis. One of the key vehicles for our constituents is increased federal funding through the Medicaid federal-state partnership which exists today; something we have had to fight to continue over the past several years. This excerpt from the April 27 article in Governing states why our advocacy always has to include the federal along with the state and local.
On Saturday, New York Gov. Andrew Cuomo released a revised financial plan that calls for cuts of $8.2 billion in aid to localities, along with a 10 percent cut in state spending, absent direct federal help. Through 2024, Cuomo said, revenues will fall short by $61 billion. Revenue in California cities will decline $6.7 billion over the next two years, mainly due to dropoffs in sales and hotel taxes, according to a League of California Cities estimate.
Dan White, director of fiscal policy research at Moody’s Analytics, says if the economy remains mostly frozen through the summer, it could take six to seven years for the resulting job losses to be erased, a scenario he calls “unfortunately relatively plausible.” Combine the revenue cuts with the increase in service demand, he says, and “some states are going to see 30 to 40 percent of their budgets that need repairing.”
Given the magnitude of the problem, associations representing state and local governments are calling on Washington to provide anywhere from $250 billion to $500 billion in direct aid. The feds have already devoted some $180 billion to states and large cities, but those funds are dedicated to unemployment and COVID-19 response. The Treasury Department has made it clear states can’t use the money to balance their budgets.
Mitch McConnell, the Senate Republican leader, suggested on Wednesday that it would be better to allow states to go bankrupt (which is not legally an option) rather than bailing them out for bad fiscal management or to prop up their pensions. That may have been more a bargaining ploy than a firm position, but it’s clear that congressional Republicans are less eager to assist states and localities than Democrats.
There are bipartisan bills in Congress that would send $500 billion to states and localities. The size and scope of any fiscal relief package won’t be known until next month. But it’s clear states, cities and counties will struggle mightily to cut their way out of their budget problems, absent federal help. Tax increases will also be politically unpalatable in most places.
“No state has the financial wherewithal to make up for a prolonged loss of economic activity like we’ve been seeing for the last month,” says Laurence Msall, president of the Civic Federation, a tax policy organization in Chicago.
“Even the states that are really well-prepared are going to be overwhelmed by the sheer size of this thing,” White says. “It’s not like anything we’ve seen before and it’s not something we’re likely to forget anytime soon.”