State governments will receive a huge inflow of federal funds from the $ 1.9 trillion COVID-19 aid package that could suddenly enable them to carry out large, expensive projects that have long been on their to-do – List stand, including high speed internet for rural areas and drinking water improvements.
The aid plan, approved by Congress in tight party line votes and signed by President Joe Biden on Thursday, includes $ 195 billion for states and separate funding for local governments and schools.
While the package includes significant short-term financial relief for businesses and individuals who have suffered the outbreak, its Democratic supporters also see it as a rich opportunity to help states fight poverty more generally and achieve the big things that the Government did earlier.
With most state budgets not in the trouble many feared last spring, states can use their share of the money to go well beyond balancing the books and managing the direct costs of the coronavirus pandemic.
“There are no words to describe the impact on a state that has long had extreme and persistent poverty,” said New Mexico governor Michelle Lujan Grisham, a Democrat. “This is exactly the investment that we have always deserved and that we need now more than ever.”
Even Republican governors who have opposed the plan are developing ambitious plans similar to those on the wish lists of Democratic lawmakers and governors.
In Democratic-controlled California, GOP-owned Idaho, and Vermont, with a Republican governor and Democratic legislature, priorities include potable water and rural broadband projects.
In New Mexico, officials expect to use $ 600 million to pay off debt to the state unemployment fund – a move that would prevent corporate payroll taxes from rising – and still have more than $ 1 billion on projects such as grants for economic development and road improvements and others yet to be determined.
While the gigantic CARES bill passed in March last year included $ 150 billion for state, local, and tribal governments, that aid was mostly limited to direct costs related to pandemics. The new package gives states much more flexibility.
Republican governors argue that the economy is already recovering and that all expenses will ultimately have to be paid back by taxpayers. They also oppose a formula that distributes more money per capita to states with higher unemployment rates, which they see as a punishment for keeping more of their economies open as a result of the pandemic.
“Rather than using the bipartisan blueprint of previous federal coronavirus relief bills, this legislation is literally a wish list for California and New York,” said Brian Kemp, Georgia governor. “It’s a slap in the face for my fellow Georgians.”
The Republicans who control the Georgia government are working on plans to cut taxes – something that is being pursued in other GOP-led states, including Arizona and Iowa. However, this could violate a provision in the aid package that prevents the money from being used to pay for tax cuts.
Across the country, it turns out that the picture of the state budget in general is not as bleak as expected. Last year’s relief spending helped send money directly to governments, businesses and individuals. It helped keep the workers on the payroll and paid taxes.
In addition, investors who generate much of the tax revenue in states like New York and California, which announced a $ 15 billion surplus in January, had a good year due to the pace of the stock market. And the pandemic job losses were lowest among low-wage workers, who make up a smaller portion of tax revenue.
An analysis by the Tax Foundation, a nonprofit that promotes growth-promoting activities, found that 28 states had less revenue in 2020 than in 2019. The hardest hit states included Florida, Hawaii, Nevada and Texas, which are heavily dependent on tourism and sales taxes.
However, the amounts that states are expected to receive from the COVID-19 relief package exceed the revenue declines in each state and amount to more than 100 times the combined revenue loss that the group has identified.
While Idaho Governor Brad Little generally objected to the democratic measure, he outlined some of the same priorities as his Democratic counterparts.
“We know the debt is being pledged by our grandchildren,” he said, “and I will seek to use those funds to support them directly through long-term investments in education, broadband and water infrastructure.”
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Mulvihill reported from Cherry Hill, New Jersey. Follow him at http://www.twitter.com/geoffmulvihill
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Associate Press Reporter Jeff Amy in Atlanta; Adam Beam in Sacramento, California; Susan Montoya Bryan in Albuquerque, New Mexico; Andrew DeMillo in Little Rock, Arkansas; Keith Ridler in Boise, Idaho; and Wilson Ring in Montpelier, Vermont, contributed to this story.
Geoff Mulvihill, The Associated Press
