State And Local Governments About To Get A Self-Inflicted Shit-Hammering...,

jacobin |  Centrist Democrats are tacking hard right on the shaky premise that calls for Medicare for All and policing reform flattened the anticipated “blue wave.” And in statehouses, that wave proved less than a ripple: Republicans now control both legislatures in thirty states and have a “trifecta” stranglehold (claiming the governor’s office, too) in twenty-three of those.

All this will make it harder to address one of the starkest failures of the government’s response to the COVID-19 economic crisis: the sustained neglect of state and local finances. State and local governments are directly responsible for providing essential services, including education and public health. And they are an important source of (mostly) good jobs, employing almost 20 million people — or about one in eight workers — when the virus struck.

The CARES Act included $150 billion in aid to state and local governments, but with the proviso that it could only be used to defray the unanticipated costs of fighting the pandemic — not for any “regular” budgetary lines. In some states, governors either skirted these limits (using federal funds, for instance, to fill potholes) or made dubious decisions as to who to protect. Both Arizona and Iowa used large chunks of their CARES grants to backfill their unemployment insurance trust funds — shielding employers from future tax increases even as their workers lost access to extended or expanded unemployment benefits.

The only other assistance was an effort to financialize state and local desperation. The CARES Act authorized the Federal Reserve (through a new Municipal Liquidity Facility) to buy state and local bonds. This line of credit just kicked the crisis down the road. And the loan terms and costs were so onerous that, as the Center for Popular Democracy concluded in June, all but a handful of the jurisdictions that met the program’s population thresholds were “functionally excluded.”

As summer spilled into fall, it became clear that no further federal money was on the way. The Heroes Act earmarked more than $1 trillion for state and local aid for any pressing needs (including shoring up revenues) but the Republican response — not a penny for state and local governments and sweeping immunity for business from COVID-related lawsuits — ground negotiations to a halt.

Recessions always savage state and local budgets, but this one — given its suddenness and severity — has been especially rough.