As negotiations for a coronavirus stimulus bill remain at a standstill, millions of Americans continue to grow doubtful over the prospect of the federal government providing a lifeline.
In a battle rooted in partisanship, the Republican-led Senate and the White House have turned a deaf ear to Democrats’ stimulus proposal that would include aid for states and municipalities, including the District of Columbia, and money for essential services like health care and unemployment benefits.
Both sides had previously agreed to a second round of direct payments to Americans for roughly the same $1,200 per individual as determined in the earlier CARES Act.
“It’s becoming plain that all Congress will do before the Nov. 3 election is pass legislation to avert a government shutdown,” the Associated Press noted.
“The outcome of the election promises to have an outsized impact on what might be possible in a post-election lame-duck session, with Democrats sure to press for a better deal if Democrat Joe Biden unseats President Donald Trump,” the article continued.
However, it remains to be seen whether as the Democrat-led U.S. House returns this week, lawmakers will focus on resuming negotiations with the goal of finding common ground.
“State and local governments went into this year expecting things to be pretty easy,” said Tracy Gordon, a senior fellow at the Tax Policy Center a joint venture of the Urban Institute and the Brookings Institution that focuses on fiscal challenges facing municipalities.
“Instead, they’re faced with this once-in-a-lifetime challenge, on the heels of the Great Recession, which everyone then thought would be a once-in-a-lifetime challenge.”
According to the financial website Bankrate, budget cuts are typically a state’s first option in efforts to make up for shortfalls. Departments that receive the lion share of state funding – K-12 education, public safety and health care – typically serve as the first budgeted items to go under the ax. Other, smaller agencies could be trimmed as well, or states could shift special funds earmarked for another department into the general budget fund.
Another way legislatures often fill a budget shortfall is by raising taxes, though that option isn’t as politically viable, according to Bankrate experts.
States are likely to make budget cuts and then tap into their rainy-day funds first, which Bankrate experts noted hit record highs across most states leading up to the recession, though some had less than a week of reserves put away.
State workers who rely on public pension funds for their retirement income may dread the coronavirus crisis. But former state workers already drawing payments should not feel any impact, nor should those on the brink of retirement, though more significant funding issues could arise down the road.
Even though state and local governments employ only about 14 percent of workers, the hard-hit sector has had negative consequences on the rest of the economy, given the overall contagiousness of recessions. Estimates from the Pew Charitable Trusts shows that states lost out on an estimated $283 billion during the Great Recession as revenues held below 2008 levels until 2013 after adjusting for inflation.
Threatened cuts to federal funding – a game-changer – to several major U.S. cities, including the District of Columbia, have served to worsen conditions.
The White House announced it has instructed federal agencies to prepare reports for the White House Office of Management and Budget, setting a timeline for the agency to restrict federal grants from “anarchist jurisdictions.”
The memo explicitly mentions the District.
“The President’s memo that threatens to withhold funds from named cities, including the District of Columbia, if acted upon, would unconstitutionally usurp the spending power, which lies exclusively with Congress,” D.C. Democratic Delegate to the U.S. House Eleanor Holmes Norton, stated.
“The President may be able to condition funding if Congress has given him the power to do so, and a circuit court recently held he may be able to withhold policing grants from sanctuary cities, though there is a circuit split on this matter,” Norton said. “But his memo’s wholesale threat to withhold funds from cities is a violation of the Constitution’s separation of powers which gives the spending power exclusively to Congress.”