* Our old friend Amanda Kass of the Government Finance Research Center at the University of Illinois-Chicago and Philip Rocco of Marquette University penned an op-ed for Governing Magazine entitled “The Myth of ‘Unnecessary’ Federal Aid to State and Local Governments”…
Second, the myth relies on narrow assumptions about the appropriate indicators of fiscal need. While on average state and local revenues have fared better than initial expectations due to the combination of an economic rebound and extensive federal stimulus, revenues are only half of the equation. What’s missing is a focus on the spending needs created and exacerbated by the pandemic that cannot be addressed even if revenues return to their pre-pandemic baseline.
State and local budgets account only for planned spending and do not capture the amount necessary to meet the full demand and needs of their respective communities. The number of people experiencing homelessness or at risk for eviction has increased, for example, but spending on emergency housing and relief programs is based on the number of people the programs can support, not on how many people actually need assistance. Yet even analyses by supporters of additional aid note that they cannot account for spending needed to “help people and businesses facing extreme hardship,” ongoing costs tied to combating the disease itself or “the added costs of providing services effectively and safely during a pandemic.”
Determining the full scope of spending needs is challenging, and hinges on subjective decisions around what constitutes a COVID-related expenditure and what should be prioritized. Yet few analyses consider whether the pre-COVID status quo for state and local governments was acceptable.
For years, governments have deferred maintenance on existing infrastructure and facilities and underinvested in an array of programs and services. While the pandemic placed unprecedented strains on state unemployment insurance systems, their pre-COVID baseline was unacceptable. State UI systems were riddled with administrative burdens and outdated technical infrastructures. In 2019, for example, only 9 percent of Mississippians who were eligible for UI actually received benefits.
Schools provide another example. According to Government Accountability Office estimates, in 2019 about 41 percent of school districts needed “to update or replace HVAC systems in at least half their schools.” Although deferred maintenance is quantified and recorded in financial reports, the consequences of austerity have long been displaced onto already marginalized, predominantly minority communities. While COVID-19 has made a wider swath of society feel the effects of disinvestment, the crisis has exacerbated racial inequities, which is why the issue of spending and whose needs are not being met is so central.
The Great Recession should provide federal policymakers with a powerful lesson: Limited support for state and local governments slows economic recovery. But political pressure for fiscal austerity often re-emerges before the economy is out of the woods and before adequate stock is taken of state and local needs.
There more to this, so go read the whole thing.
* Meanwhile, here’s the Wisconsin Examiner…
The U.S. Senate voted Thursday to begin debate on President Joe Biden’s $1.9 trillion coronavirus relief bill, after drafting a number of revisions that, among other changes, tweak the aid intended for state and local governments.
The legislation approved in the House outlines $350 billion in direct aid to state, local governments, territories and tribes. Of that figure, $195 billion would go to states and the District of Columbia, and $130 billion would be divided among cities and counties.
Under the Senate version, the size of the state aid would remain the same, but the share for local governments would go down to $120 billion. The $10 billion difference would be set aside for states’ infrastructure projects, like improving broadband access.
It also would set limits on how the money can be used, barring cities and states from using the dollars to pay down pension costs or to pay for new attempts to cut taxes. And it would ensure that states get at least as much as they received under the last aid package.
Based on the details emerging Thursday, [Philip Rocco of Marquette University] finds that history might be about to repeat itself. Under the Senate rewrite, “the rest of the aid is going to be subject to fairly tight restrictions and requirements,” he says — which could slow funds from getting out where they could re-energize the economy.
“If we listen to state and local officials about the difficulties they experienced with these programs, the restrictions are the biggest hurdle,” Rocco says — a hurdle that looms once again.
“I think that it’s unfortunate,” Rocco says, “because I think what happens is when these restrictions are in there, and you make it harder for state local governments to use the money, it can perpetuate the myth that we don’t need it.”
* The Deficit Hawks That Make Moderate Democrats Cower - Despite decades of being wrong, the Committee for a Responsible Federal Budget still calls the tune in Washington.