Congressional Democrats have agreed to take direct aid for state and local governments out of a new coronavirus relief package in exchange for Republicans dropping their demand for liability protections for businesses.
The idea to leave both issues on the sidelines of negotiations was proposed by Senate Majority Leader Mitch McConnell (R., Ky.) last week, in an attempt to pass a relief bill by the end of the year.
Heavily Democratic New York is facing a $15 million budget shortfall going into 2021, in part because of the coronavirus pandemic, according to Governor Andrew Cuomo. The pandemic has also hurt finances in states like Florida, which are dependent on tourism revenue, and Wyoming which raises money through energy taxes.
“There are many states that are doing reasonably well right now, and a few that are struggling substantially,” Jared Walczak, vice president of the Tax Foundation, told the Times. “That makes it very difficult to put a coalition together. That list of states isn’t red or blue, but there is a divide.”
Many Republicans have refused to send aid to state governments that they contend have managed their finances poorly.
“We don’t even know how much of the $1 trillion allocated to states and local governments by the CARES Act has already been spent, and they won’t tell us,” Senator Rick Scott (R., Fla.) wrote in National Review last week. “States do not need bailouts; they want bailouts so they can use the money — intended to address the fallout from COVID — to plug the long-standing holes in their budgets and pension systems.”
The issue of state and local aid will likely be revisited once Joe Biden assumes office in January. Biden has expressed support for state and local aid to plug budget shortfalls.