President Donald Trump has made it clear that the states must be the front-line fighters in the war against COVID-19, on everything from testing to ventilators to personal protective equipment.
That makes it all the more incongruous that Republicans are balking at providing states, cities, and towns the resources they need for that battle. Saying “we’re not interested in solving their pension problems for them,” Senate majority leader Mitch McConnell suggests that fiscally strapped states should consider bankruptcy.
Although Trump maintains he is open to discussing aid for states and cities, he has added his voice to McConnell’s partisan refrain, asking via tweet why “the people and taxpayers of America” should “be bailing out poorly run states (like Illinois, as an example) and cities, in all cases Democrat-run and managed, when most of the other states are not looking for bailout help?”
Those comments reflect witless partisanship in a time of crisis. McConnell’s remark demonstrates the GOP’s animus toward unionized public employees, who tend to be supportive of Democratic candidates; thus the suggestion that their pensions are the proximate cause of looming state fiscal problems.
That notion is simply absurd. States obviously haven’t moved from a position of relative fiscal stability to bad budgetary times because of a sudden increase in pension costs. Rather, the cause has been the steep decline in tax revenues because of the economic shutdowns necessitated by the coronavirus crisis.
Overall, income taxes contribute about 45 percent of cumulative state revenue, with sales taxes another 30 percent, according to the National Association of State Budget Officers. With unemployment heading toward Depression-era levels and many businesses closed, revenues from both are projected to drop steeply. Other taxes and fees collected by states have nosedived as well.
Moody’s Analytics predicts that in some states, the effect on the budget will be twice that of the Great Recession. Under its most severe assumptions, Moody’s sees the revenue decline driven by COVID-19 and the new spending the crisis requires having a cumulative effect of $353 billion through the end of fiscal 2021. Extending that through fiscal 2022, the need grows to more than $450 billion; subtract state reserves, and you have a “27-month forecast shortfall of close to $300 billion.”
Based on new economic forecasts from the Congressional Budget Office, meanwhile, the Center on Budget and Policy Priorities calculates a coronavirus-driven fiscal shortfall of $650 billion over the next three years. Factoring in state reserves and already allocated federal aid, that leaves a gap of at least $510 billion. Notably, neither estimate includes the needs of cities and towns. House Speaker Nancy Pelosi says cities and towns are asking for a similar amount.
Because most states are required to balance their budgets, without federal help, deficits of that magnitude will inevitably mean deep cuts in important services, from health care to education to public safety to programs for the poor.
Those deficits will also spell layoffs. In that light, it’s important to realize that state and local governments employ some 17.3 million people, or about 11 percent of the country’s workforce.
The federal government, however, isn’t bound by a balanced budget requirement and thus could play a vital role here. With the yield on treasury bonds at near-record lows, the federal government could easily borrow to help plug state budget gaps for this fiscal year and the next. (State budget cycles generally start in July and end on June 30 of the following year.)
Speaker Pelosi and her House Democrats deferred to the Senate on the last COVID-19 legislation, which funded the Paycheck Protection Program and provided more money for testing but didn’t include more dollars for states and cities. Although a previous bill had some such monies, it stipulated that those dollars couldn’t be used to pay for regular state expenses.
But Pelosi is adamant that any new legislation must include money for cities and states. She’s right to insist on that. Without federal money, states and cities will be left to raises taxes, slash services, and lay off employees, including firefighters, police, and teachers.
Those moves will only worsen suffering and deepen the recession. The only plausible way to avert such large-scale damage is for both parties in Congress to support relief for the states. If the GOP refuses to allocate that aid, voters should place the blame squarely where it belongs: with President Trump and the Republican Senate.
Editorials represent the views of the Boston Globe Editorial Board. Follow us on Twitter at @GlobeOpinion.