Democrats Insist On Sending A Mountain Of Cash To States That Don’t Need It

Democrats’ Partisan Spending Bill Includes A $350 Billion Bailout For Big-Spending State And Local Governments Many Orders Of Magnitude Larger Than Any Estimates Of Lost Revenues, Even As Many States Are Raking In More Tax Money


SENATE REPUBLICAN LEADER MITCH McCONNELL (R-KY): Democrats are “sending $350 billion to bail out long-mismanaged state and local governments, multiple times the expert estimates of COVID needs.” (Sen. McConnell, Remarks, 3/02/2021)

SEN. RICK SCOTT (R-FL): “If you look at state revenues year over year, they’re barely down, they’re not even down 1%. You got a state like California, their revenues are up $19 billion dollars, they’re going to put $22 billion dollars in reserves. We gave the state and locals $400 billion. Some states have the extra money we gave them for Medicaid has allowed them to spend money on a lot of other things. A lot of these states are seeing a significant increase in what their budgets are going to be this next year. So we can’t be doing this. $350 billion dollars.” (Sen. Scott, Press Conference, 3/03/2021)

SEN. PAT TOOMEY (R-PA): “The notion that our states and municipalities are in some kind of fiscal crisis, couldn’t be more wrong. It’s just factually untrue as Senator Scott pointed out. In fact, amazingly enough, the numbers are in now for 2020. State and local tax collections were actually 20 billion dollars higher than 2019. And 2019 was an all-time record for revenue. So let me say this again. Think about this. 2020 was an all-time, record high revenue year for states and local governments across the country. Take California. If you take 2019 and 2020 and what they’re projecting for 2021, which we’re well into now, so this period of time is mostly behind us, they’re projecting 38 billion dollars more than they had projected back in 2019. They’re blowing the doors off of their estimates of their revenue. That’s what’s happening. Now, despite that, last year we gave, and if you include state and local governments, about $500 billion dollars on top of the record amount of revenue that they were already collecting. And now we’re being told they need another $350B? Really? A lot of the money we’ve sent them is still unspent. States are sitting on at least 60 billion dollars in rainy day funds.” (Sen. Toomey, Press Conference, 3/03/2021)

Democrats’ Bailout For Big-Spending State Governments Is Out Of All Proportion To Estimated Revenue Shortfalls

“But at least one important slice of the package -- the nearly $200 billion being earmarked to state governments -- goes beyond a rescue and is almost certain to further stimulate an economy that is already beginning to rapidly recover. That’s because those proposed cash transfers are more than six times greater than the approximately $31 billion of expected tax revenue that disappeared in the current fiscal year, according to pre-pandemic and more recent forecasts compiled by Bloomberg. In other words, that money could make up for that loss and be plowed back into states’ economies, such as their own version of relief checks, infrastructure projects and more, depending on the federal guidelines around the aid.” (“Biden’s State Rescue Dwarfs Tax Hit, Turning It Into Stimulus,” Bloomberg, 3/03/2021)

Democrats Have Included More Money For State And Local Governments Than Even The Most Extreme Recommendations From A Left-Wing Think Tank

“Moody’s Analytics found in a report that states and cities only need $61 billion. The American Enterprise Institute, a conservative think tank, pegs that number at closer to $100 billion, although the left-leaning Center on Budget and Policy Priorities found as much as $225 billion was needed. Many states face much better fiscal outlooks than expected at the outset of the pandemic.” (“As Senate Rushes $1.9 Trillion Bill Through Congress, Biden Faces Doubts Over Whether It’s Still The Right Package,” The Washington Post, 3/04/2021)


‘For Many [States] The Worst Didn’t Come’ And ‘Tax Collections Turned Back Up Again, All In The Span Of A Few Months’

“Democrats have argued … that states face dire fiscal consequences without aid, and included $350 billion in relief for state and local governments in President Biden’s $1.9 trillion federal stimulus bill, which narrowly passed the House this past weekend…. As it turns out, new data shows that a year after the pandemic wrought economic devastation around the country, forcing states to revise their revenue forecasts and prepare for the worst, for many the worst didn’t come…. By some measures, the states ended up collecting nearly as much revenue in 2020 as they did in 2019. A J.P. Morgan survey called 2020 ‘virtually flat’ with 2019, based on the 47 states that report their tax revenues every month … A researcher at the Urban-Brookings Tax Policy Center, a nonpartisan think tank, found that total state revenues from April through December were down just 1.8 percent from the same period in 2019. Moody’s Analytics used a different method and found that 31 states now had enough cash to fully absorb the economic stress of the pandemic recession on their own.” (“Virus Did Not Bring Financial Rout That Many States Feared,” The New York Times, 3/01/2021)

  • “Most state tax collections plunged last spring when shutdown orders started and millions were thrown out of work as businesses closed. That prompted many states to issue doomsday forecasts, lay off workers and turn to Washington for billions of dollars in aid to replace revenue they were expecting to lose. Many feared a replay of the Great Recession … But this time, after falling 4 percent over all, [Brookings Institution economist Louise] Sheiner said, tax collections turned back up again, all in the span of a few months.” (“Virus Did Not Bring Financial Rout That Many States Feared,” The New York Times, 3/01/2021)


‘[I]t Is Increasingly Clear That The Pandemic Reduced States And Local Governments’ Revenue Far Less Than Initially Feared, Especially Considering Federal Aid They Have Already Received’

THE WASHINGTON POST EDITORIAL BOARD: “[I]t is increasingly clear that the pandemic reduced states and local governments’ revenue far less than initially feared, especially considering federal aid they have already received. California is in surplus; New Hampshire Gov. Chris Sununu (R) is proposing tax cuts. Moody’s Analytics’ latest ‘stress test’ of state finances shows that 31 states have enough money ‘to fully absorb the economic stress of COVID-19,’ without substantial budget cuts or tax increases; seven have ‘most’ of what they need. Just 12 states still face budget gaps of 5 percent or more. Yet the House bill contemplates $510 billion in new aid, including $30 billion for transit, $130 billion for public schools and $350 billion in unrestricted funds. By contrast, the Committee for a Responsible Federal Budget notes, $200 billion would be enough to cover states’ revenue losses and extra school spending through Sept. 30, 2023.” (Editorial, “Biden Asked What Could Be Cut From His Covid Relief Package. Here Are Some Ideas,” The Washington Post, 2/22/2021)

THE WALL STREET JOURNAL EDITORIAL BOARD: “Democrats in Congress are planning to ladle out another $350 billion to state and local governments, though many haven’t finished spending their Cares Act checks and some are running budget surpluses. This is income redistribution for public unions. About one third of the $150 billion that Congress allocated in direct aid to state and local governments last spring still hasn’t been spent. These funds were intended to help governments cover pandemic needs amid budget shortfalls, but most haven’t needed it.” (Editorial, “The Unnecessary State Covid Bailout,” The Wall Street Journal, 2/24/2021)

  • “Most blue states have progressive income tax structures and have benefited from booming asset prices, especially equities. California has a $15 billion surplus. Revenue last month was $3.7 billion (17%) higher than in January 2020. Democrats are now planning to spread their surplus around. Gov. Gavin Newsom on Tuesday signed a $7.6 billion state-funded Covid spending bill that includes $600 payments to individuals earning up to $30,000. Undocumented immigrants could qualify for checks up to $1,200.” (Editorial, “The Unnecessary State Covid Bailout,” The Wall Street Journal, 2/24/2021)

THE WALL STREET JOURNAL EDITORIAL BOARD: “Governors—especially from Democratic states—have been pleading revenue poverty since the pandemic began. But as we approach the anniversary of Covid-19 in America, that tall tale is becoming more difficult to sell. Even the left-tilting media are beginning to figure out what we’ve been reporting for some time…. Add the $350 billion windfall that will soon flow to state and local governments from the $1.9 trillion Biden relief bill, and the states will be swimming in cash…. California already has tax revenue coming in above its pre-pandemic level, thanks to a buoyant stock market and capital gains. But it will receive another $27 billion from federal taxpayers, or 17% of the state’s entire general fund revenue. Pennsylvania will receive $7.1 billion, or 20% of its tax revenue. You won’t hear this from most governors, who still want a handout from the feds. But the telltale sign is that many of the most spendthrift politicians are making no effort to cut spending or reform their governments.” (Editorial, “States of Budget Surplus,” The Wall Street Journal, 2/10/2021)



Related Issues: Senate Democrats