Red states are facing large budget shortfalls and are in need of federal assistance, even though congressional Republican leaders have portrayed the problem as one affecting Democratic-led states only.
Louisiana, Kentucky, Florida, Georgia, and Arizona, among others, are facing revenue shortfalls of many hundreds of millions or billions of dollars.
Even many top Republican elected officials have acknowledged the danger facing red states.
“Blue states aren’t the only ones who are screwed,” Utah Sen. Mitt Romney pointed out wrote on a poster displayed during a Republican senators’ luncheon in May.
President Trump has said that all of the states in need of financial help are run by Democrats and that Republican states like Florida and Texas are “doing phenomenal” while Midwestern states are “fantastic — very little debt.”
Trump is right that Democratic states, such as California, facing a daunting budget deficit of $54 billion, and New York, seeking a $61 billion in aid, are the hardest-hit.
However, officials in Florida have said they expect their state to be “short billions and billions” in revenue, and the state is projected to be one of 10 states whose budgets would be hit the hardest.
But GOP-led states also face massive fiscal problems.
Texas, which has been hit by a downturn in oil prices, has also seen tax collections plummet by nearly a billion dollars and is expected to make significant budget cuts.
In Georgia, another Republican-controlled state, the state’s appropriations committees of the House and Senate have asked the federal government to approve $500 billion in state shortfall relief, according to a letter they sent to members of the state’s congressional delegation in May.
“We are formally requesting your support for the timely approval and disbursement of these funds to close the unprecedented gap in dollars required to maintain a conservative and lean government framework of services for the state of Georgia and our constituents,” the letter states.
House and Senate Democrats have called for a $1 trillion federal aid package for state and local governments coping with significant revenue losses due to the coronavirus outbreak.
The White House has since expressed an openness to giving states aid to deal with budget shortfalls in exchange, perhaps, for concessions from Democrats on certain tax proposals.
Brian Riedl, a fiscal expert with the conservative Manhattan Institute, said that although Democratic-run states such as New York and Illinois have been the most vocal in calling for state bailouts, many Republican states are also in need of help in addressing their budget shortfalls.
“Louisiana is in the worst financial situation, and it’s a Republican state. Kentucky also has one of the five biggest shortfalls,” he said.
However, Riedl said it’s too early for any further state spending or a significant bailout of any kind. He said it wasn’t clear yet how much money many states need because the economic reopening has just begun, and many states will be able to cover their shortfalls using their “rainy day funds.”
Furthermore, Riedl said, there is already legislation in the House and Senate to allow states to use the $150 billion in federal aid to states for budget shortfall purposes. This money was included in the CARES Act coronavirus relief legislation that Congress passed in March, but currently, states are not allowed to use that money for anything other than unbudgeted costs related to the pandemic. This is why many states have not used those funds entirely yet, said Riedl.
“Between rainy day funds and hopefully the extra pandemic funds, many states will be fine for another year. When I hear calls for $500 billion or a trillion dollars, that’s so far beyond what states actually need right now, that would be totally irresponsible,” said Riedl.
However, some states, such as Arizona, a key state for Trump’s reelection, is projecting a budget shortfall that “is going to be more than a rainy day,” Arizona Gov. Doug Ducey, a Republican, told KTAR in an interview.
Arizona is expected to have a deficit of between $600 million to $1.6 billion through the next fiscal year.
Senate Majority Leader Mitch McConnell suggested in April that coronavirus federal relief to states amounted to a “blue state bailout,” adding that states should perhaps file for bankruptcy instead of receiving emergency aid from the federal government.
However, McConnell’s own state, Kentucky, is projecting a revenue shortfall of nearly $1.3 billion through the upcoming fiscal year. The state’s annual budget is approximately $12 billion.
“It’s kind of interesting McConnell is opposed to the federal bailout given Kentucky has one of the biggest shortfalls,” said Riedl.
In May, the National Governors Association, 26 Republicans and 24 Democrats, called on Congress to provide $500 billion in “unrestricted fiscal support” to avert “significant reductions to critically important services all across the country.”
“This is not a red state and blue state crisis. This is a red white and blue pandemic,” said the Governors Association Chairman, Republican Gov. Larry Hogan from Maryland, and the vice chairman, Democratic Gov. Andrew Cuomo from New York, in a joint statement.
