States Should Not Get More Coronavirus Relief Funds

When the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, it included a $150 billion Coronavirus Relief Fund (CRF).  The money was to be used in response to the expenses arising from the COVID-19 health emergency between March 1, 2020 and December 31, 2020.

Despite the unprecedented economic impact of the pandemic and what seemed to be a clear need for this money to be allocated and spent quickly, as of June 30, 2020, state and local governments in total have spent less than a quarter of those relief funds.  The Treasury Department’s interim report on CRF spending shows that only three states have spent more than 50 percent, 23 states have used less than 10 percent, and 11 of those have used less than 5 percent.

Despite the failure to use this money, House leaders are demanding that the Senate agree to spend another $1 trillion, which is one-third of the $3 trillion HEROES Act, passed by the House on May 15.  The Treasury report makes it clear that the $1 trillion is excessive and unnecessary.

The requests for more money reflect the fiscal condition of the various states.  In Illinois, State Senate President Don Harmon (D) asked for $41.6 billion from the federal government, including a bailout for the state’s ailing pension fund, which has been a growing and unaddressed issue for many years.  Yet, from the $4.9 billion that Illinois has received from the CRF, the state has only spent 15.3 percent of the money.

Governor Phil Murphy (D-New Jersey) lobbied President Donald Trump for a “significant amount.”  He also pushed Senate Republicans to provide more aid to the state, claiming that New Jersey would face a lot of cuts in the budget.  However, the state has only used 4.7 percent of the funds provided from the CRF.

California expects Congress to pass another coronavirus bailout, building $14 billion of that money into the $202 billion pandemic budget signed by Governor Gavin Newsom (D).  The state is facing a $54.3 billion budget deficit and has spent 74.5 percent of its CRF money, the most of any state.

At the other end of the spectrum, South Carolina has spent $763,028 of the $1,996,468,642, or 0.038 percent of the funds from the CRF.  And Connecticut, an early hot spot for coronavirus, spent only 4.6 percent of the funding.  Some states tried to be creative, including Alabama, which initially planned to spend $200 million for a new State House and Capitol renovations and $800 million for broadband internet service across the state. Criticism of this proposal led to it being shelved, and the state has only spent 0.2% of its CRF funding.

Citizens Against Government Waste argued that these bailouts punish states that are fiscally responsible.  For example, Idaho ended its fiscal year with a surplus, and Utah’s budget shortfall was only $850 million instead of the forecasted $2 billion.  Other states have reported similar results that fall far short of the initial estimates.  And most states are taking matters into their own hands by reducing nonessential spending, increasing some fees, and using rainy day funds, which were set aside for emergencies.

The loudest voices are coming from the states with the worst financial problems, all of which preceded and transcend the pandemic.  While it appears likely that there will be a vaccine for COVID-19, a federal bailout will not cure longstanding state financial profligacy.  Treating that affliction will require fiscal discipline, a bitter pill to swallow for states like California, Illinois, and New York.

FOOTNOTE: The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW).