Pressure is mounting on federal lawmakers to avert a national budget crisis for state and local governments caused by the COVID-19 pandemic.
Local governments in Maryland and other states may have to lay off employees or make other drastic cuts as they look to fill an ever-widening budget gap brought on by orders that closed most businesses and dislocated workers.
“We’ve got to keep state and local governments solvent, solvent to keep up with the high level of demand for government services,” said Lee Saunders, president of the American Federation of State, County and Municipal Employees national, a union with over 1.4 million members. The union is also the largest state government employees union in Maryland. “The money should go to state and local governments to provide the level of services that are necessary to stop this talk about furloughs and reductions for those everyday heroes.”
Saunders estimated states will need $500 billion in direct aid to replace lost revenues as well as another $200 billion for Medicaid expenses. None of those figures include aid to local governments.
Maryland and other states are facing the potential loss of billions in revenue as the response to the pandemic, including the closure of nonessential businesses, pushes into its second month.
And while a phased-in recovery could begin in the next month, state budget officials project a $2.8 billion loss in revenue from lost sales and income taxes at the state level alone. Locals will also likely take a hit on income tax withholdings as the number of unemployed in the state approaches 300,000 in five weeks. That figure is expected to climb.
There are no estimates yet for how Maryland’s economy will be affected if restrictions continue through the summer.
How much aid the states will receive is up for debate.
Sen. Mitch McConnell, the top Republican in the Senate, appeared to reverse course Monday and say he was open to providing some aid. Last week, he suggested that some states should declare bankruptcy instead of expecting the federal government to come to their rescue.
McConnell now says he’d be willing to consider additional aid but linked it to provisions that would shield businesses from liability-related claims connected to the virus. McConnell also did not want money used for pre-existing issues, such as struggling state pension systems.
“They’re not concerns. They’re excuses,” House Speaker Nancy Pelosi, a Democrat, said of McConnell’s comments during a call with reporters Tuesday. “This is money that is desperately needed.”
Gov. Larry Hogan, a Republican, said Maryland and other states are seeking $500 billion in direct aid to states over and above an initial $150 billion in approved aid. That money for state and local governments, however, is meant to offset direct costs of fighting the virus rather than to make up for revenue loses.
Hogan and leaders in the state’s 24 large jurisdictions have imposed spending and hiring freezes and vowed to hold off on furloughs and layoffs — at least for now.
Nationally, budget experts warn that state and local governments will be forced to consider layoffs and furloughs without federal assistance.
Pelosi said Congress may have to do two separate aid packages — one for states and another of similar size for local governments. The money, she said, could be doled out over a number of years rather than right away.
“This is about giving the states the money to do their jobs,” Pelosi said.