Another Reason Republicans Are So Mad About Congress’ State Relief Plan

Since last summer, one of the major sticking points that prevented Congress from passing more coronavirus relief had been the question of how much money – if any – to send to state governments. Lawmakers finally came up with a compromise in December, but now the issue of state aid is hampering attempts to pass President Joe Biden’s first significant legislative priority: a $1.9 trillion COVID-19 rescue package.

There are major two issues at play. The first is whether states and localities really need the $350 billion in aid that the House included in the rescue package. The second is a little more in the weeds, but it deals with the way in which Congress would dole out the money to states. The House made pretty significant changes to the criteria since its earlier packages from last year, and Georgia’s governor, in particular, is crying foul.

That’s our story this week, as the Senate starts its own deliberations on the massive recovery package.

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Onto the news…

Georgia Gov. Brian Kemp is trying to rally opposition to the economic rescue package that Biden and his administration are trying to push through the Senate. But Kemp’s argument is different than that of other red state governors, several of whom have said states shouldn’t need any more federal money.

Instead, Kemp says that changes in the way Congress plans to split the money among states shortchanges Georgia and other Republican-led states. Meanwhile, New York and California benefit the most from the new approach.

He’s referring to Democrats’ decision to divvy up half of the state aid based on the average number of unemployed residents in each state at the end of 2020, rather than just by population.

“The current formula being considered in Congress would allocate over 50% more to a resident in New York than a resident in Georgia. The Peach State would be the worst-hit under this new plan, receiving nearly $1.3 billion less than if the previous formula were applied. This is unacceptable,” Kemp wrote in an opinion piece for Fox News. 

“The people of Georgia should not be punished by a federal government hoping to tip the scales in favor of other lockdown states who chose to decimate their own economies,” he added. “It is no coincidence that the home states of Speaker of the House Nancy Pelosi, D-Calif., and Senate Majority Leader Chuck Schumer, D-N.Y., are the biggest beneficiaries of this blue state bailout.”

According to an analysis provided by Kemp’s office, the 10 states that gain the most from the change in formula are:

The states that lose the most by switching to the method are:

Vermont and Nebraska would lose more than half of their formula-driven aid, according to the Georgia governor’s office.

The other half of the direct state aid would be divided evenly among states, regardless of their population or unemployment numbers.

I couldn’t reach House Democrats to explain the switch in criteria for doling out the state aid. But policy experts have talked for months about using a different metric rather than just population to divide the money, so that it would go to the states that needed it the most.

The Democrats, in fact, used a more complicated formula for their sweeping HEROES Act legislation, which they passed through the House last spring but never got a hearing in the Senate, which was then controlled by Republicans. That proposal would have factored in population, unemployment and COVID-19 cases.

There are certainly political risks if the Senate passes legislation that is seen to hurt Georgia. It was Georgia, after all, that elected two Democratic senators and gave Democrats a functional majority in the upper chamber.

Now there are reports that Senate Democrats will restrict when states can get the money and what they can spend it on. According to Roll Call, a new proposal calls for the federal government to give the money to states in two separate rounds. The first half would come immediately, but only states with the highest proportion of unemployed residents would get the second half right away. The rest would have to spend most of the money they got in the first round before getting a second influx. The proposal would also bar states from using the money for things like funding their pension systems or staving off tax hikes.

Marc Goldwein, the senior vice president for the Committee for a Responsible Federal Budget, says that regardless of how the money is split up, the proposals allocate too much money for state aid.

Congress, he said, has already allocated at least $360 billion to go directly to states and local governments since the onset of the pandemic, with more money to offset disaster costs. That also doesn’t include tax revenues states have collected on unemployment benefits or other new benefits.

If you include federal aid, states received more money in 2020 than they did in 2019, he said.

“This is clearly giving ridiculous amounts of money to states that don’t need any,” Goldwein said. “Unfortunately you can’t make policy by just saying, ‘It’s really clear that Hawaii, Alaska, Texas, Florida and Nevada are hurting, so we should only give to them. We need a formula…. But it’s very clear that the overall allocation is too high.”

But Richard Auxier, a researcher who focuses on state and local finance for the Tax Policy Center, said states still need additional support.

The overall numbers, he warned, can mask the needs of individual states. In fact, 28 states saw declines in overall state tax collections when comparing the last nine months of 2019 to the same period in 2020. Seven of those states saw double-digit declines.

What’s more, state budgets appear better off now than they did at the beginning of the pandemic, because governors and lawmakers have already made widespread cuts (or, in some cases, even raised taxes) in anticipation of major revenue losses.

“I find it hard to believe that, if you think of where we wanted to be before the pandemic was on our radar, that the current state we’re in looks good,” Auxier said.

But both Auxier and Goldwein said that, while there are shortcomings to using unemployment data to determine state aid amounts, there aren’t a lot of other good options available.

That said, Goldwein isn’t convinced that giving out aid based just on population is better than using unemployment. The per capita formulas might have made more sense at the beginning of the pandemic, when no one knew how the pandemic would affect the economy, he said. Now, though, Goldwein said, some sort of aggregate number like a state’s GDP might be a better measure to use.

Unemployment, he said, is an “imperfect” way to assess need. People might still be in jobs but have lost a lot of their income. Or a state’s economy might be suffering from the sudden disappearance of tourists or the plummeting prices of oil.

The advantage of using unemployment figures to disperse aid, added Auxier, from the Tax Policy Center, is that those numbers are “known, understood and explain that the pandemic is affecting states in different ways.”

Let me know what you think about this week’s issue: Are states getting too much money in the rescue plan? Is unemployment a good way to divide up the aid that the states do get?

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I’d also love to hear your ideas for future stories. Thanks for reading. If you’re looking for more, here’s the States of Crisis archive, and links to some of my other stories are below.