As the House of Representatives prepares to vote on a $3 trillion bill on Friday, May 15, there are many provisions of that legislation, in addition to the cost, that will make it difficult to reach an agreement with the Senate.  Among the most controversial provisions is the proposed $875 billion for state and local governments.

The money included in H.R. 6800, the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, comes on top of the $150 billion already injected into state and local economies from the CARES Act. Unsurprisingly, the call for more financial aid for state governments predominantly comes from states who have been at the forefront of wasteful spending for decades, along with tens of billions of dollars in pension debt that is not the responsibility of the federal government or taxpayers in other states.

In New York, which has received $64 billion in relief funding, Gov. Andrew Cuomo (D) has asked for an additional $60 billion from the federal government.  While there is little argument that the Empire State has been the hardest hit by the virus, it was in a desperate financial situation before it arrived.  New York State Comptroller Thomas DiNappoli had been pleading to no avail for years with the legislature and Gov. Cuomo to put more stringent fiscal safeguards in place. 

According to a March 18, 2020 Pew Charitable Trust report, New York’s rainy day reserves could keep the state afloat for 36.1 days in the event of a downturn in fiscal year 2019.  That is two weeks less than the national median.  New York is perennially among the worst states in economic rankings, including the American Legislative Exchange Council’s 2019 Rich States, Poor States, which ranked the state dead last.  New York also happens to have the highest-paid state legislators in the country, and last year, they gave themselves a $50,500 pay raise.  When the pay raise was challenged in court, legislators paid attorneys $150,000 in taxpayer funds to defend their raises.

Illinois is the Robin to New York’s Batman when it comes to fiscal irresponsibility, State Senate President Don Harmon (D) has requested more than $40 billion in additional bailout funds from the federal government.  This includes funding for pension relief and block grant funding, which has been a growing and unaddressed issue in the state.  Taxpayers across the country should be concerned, since state officials are requesting money that does nothing to respond to COVID-19 and mainly serves to fix their fiscal holes.  Under the CARES Act, Illinois has already received nearly $3.5 billion for costs that are directly related to COVID-19.  The state’s fiscal condition has been ranked dead last by George Mason University’s Mercatus Center.

Meanwhile, taxpayers in states that properly manage their budgets and have reduced spending will have to carry the burden of other states that have been derelict in their fiscal duties.

In Ohio, for example, Gov. Mike DeWine (R) announced that he would slash $775 million in the state budget to offset lost revenues stemming from the coronavirus pandemic, including cutting funding to K-12 education, Medicaid, and state government agencies.  Gov. DeWine does not plan to immediately use the state’s $2.7 billion rainy-day fund.  In Texas, Speaker of the House Dennis Bonnen (R) suggested a 5 percent budget cut for state agencies and the beginning of discussions about the state’s economic future.  This would allow agencies to find where they need to save money and address the state’s economic fallout. Utah plans to cut up to $2 billion, or 10 percent, of its $20 billion state budget to address the state’s financial downturn.

However, even states with good fiscal behavior may act irresponsibly when given billions of dollars in financial aid.  Proposals that circulated around Alabama’s state legislature included spending nearly $1.8 billion from the CARES Act as follows:  $800 million to provide broadband internet service across the state; $200 million for new State House and Capitol renovations; and $100 million for the Department of Corrections.  After Governor Kay Ivey (R) came out and said that the spending “wish list,” was completely unacceptable, a spokesperson for Senate President Pro Tem Del Marsh announced that the legislature will no longer consider funding for a new State House.  

Speaker Pelosi’s HEROES Act rewards states that have neglected sound fiscal policy and hurts states that have shown financial restraint.  Encouraging bad fiscal behavior is never the answer. 

Before any new money is thrown at states, Congress should allow the provisions in the CARES to take full effect, then decide on whether more funding is necessary.  All states must find ways to identify and cut wasteful spending, tighten budgets, and make much-needed reforms to pension systems in order to stem the tide of the economic impact of the coronavirus.