The Corner

Capital Matters

How Much Aid Do State and Local Governments Really Need?

The Committee for a Responsible Federal Budget has a good overview. Some states have been hit pretty hard in the tax department, but in general things are not so bad, especially once you factor in the federal aid that’s already been provided to these governments.

I found this paragraph especially striking:

Inclusive of federal aid, state and local governments actually had higher average receipts in 2020 than 2019. We estimate total state and local receipts were 10 percent higher in 2020 than 2019, including 6 percent higher on a fourth-quarter-to-fourth-quarter basis. Meanwhile, spending remained relatively stable, rising by 2 percent on a year-over-year basis and 1 percent higher on a fourth-quarter-to-fourth-quarter basis, suggesting COVID-related costs have not surged net spending needs (though COVID-related needs may have crowded out other important priorities, contributing to layoffs at the state and local level).

On top of that, the half-trillion in aid that Democrats want to give is far above several estimates of governments’ actual needs, including from left-leaning sources. It’s so much money that even the hardest-hit states could get more than is needed to offset their losses.

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