By Diana Polson
In mid-May, the U.S. House of Representatives passed the “Heroes Act,” a $3 trillion aid package, by a vote of 208 to 199.
The package includes another $1,200 stimulus check to individuals, hazard pay for workers, and much needed aid to states and cities.
Also included in this package is $175 billion for a housing assistance fund to help individuals and families pay for rent and mortgage and an extension of the $600 per week boost to unemployment benefits until January. While not perfect, the Heroes Act would be an important step forward and critical to the financial health of states.
We are in the midst of an unprecedented crisis. Nationally, we face a full three months where initial unemployment claims are more than double what they were in the worst week of the Great Recession.
A total of 34.5 million workers have claimed unemployment benefits, which is more than 1 in 5 American workers. Our analysis shows that Pennsylvania’s joblessness rate was about 30 percent at the end of May. Despite the tremendous needs of Pennsylvanians, critical relief provisions are set to expire in July.
Meanwhile, the outlook for states is dire, as they are facing a cumulative $615 billion shortfall. State revenues have plummeted, falling on average by half in April due to hits to sales and income taxes while demands on spending have skyrocketed given the increased needs in public health, Medicaid, and unemployment.
Despite record unemployment and massive state budget shortfalls in the face of the COVID-induced recession, the Republican-majority U.S. Senate has sat on the Heroes Act without action for more than a month.
Let’s look at our own U.S. Sen. Pat Toomey’s, R-Pa., reaction:
“I have all kinds of problems with launching new legislation to spend who knows how many hundreds of billions of dollars more – to shovel (it) out to states, including many that are wildly irresponsible…. Government spending is no substitute for an economy.”
Like other responsible states, Pennsylvania shut down its economy in order to slow the spread of coronavirus.
Toomey’s comments are in the same vein as state Republican members of the General Assembly who have criticized and challenged Governor Wolf for his measured reopening plan. What is rarely discussed, however, is how these policies have saved potentially over a hundred thousand lives in Pennsylvania.
Pennsylvania’s spending has not been irresponsible. In fact, we would argue that it has been inadequate. Toomey argues that state spending is out of control. That is not true generally, and it certainly isn’t true In Pennsylvania.
The fact is that both revenues and expenditures have been shrinking as a share of our gross state product for more than two decades.
What has been irresponsible in Pennsylvania’s budgeting is the decades of cuts in corporate taxes, which has shrunk our ability to adequately invest in the things we need. In the early 1970s, corporate taxes provided 30% of our state’s General Fund revenues—but today, that share is nearly cut in half (16 percent).
The Commonwealth faces a possible budget shortfall of $7 billion over the next two years. States will tap their rainy day funds where possible, but Pennsylvania’s rainy day fund is miniscule and won’t be much help.
We have $340 million saved, which equals less than 5 percent of the projected $7 billion shortfall. The other options are to rely on federal support, cut spending or raise taxes.
The feds have already come through with an increase of 6.5 percent for the Federal Medical Assistance Percentage (FMAP), unemployment expansions, and other state support, but the CARES Act and other pandemic aid does not allow states to use these federal dollars to fill revenue holes.
Many states are slashing their budgets this year, including our neighbor to the west. Ohio’s governor plans to slash his state’s budget by 20 percent.
Pennsylvania has been down this road before with Governor Corbett, and it wasn’t pretty. Governor Wolf and the General Assembly wisely chose to enact a 5-month budget that flat-funds most programs and services, buying time to see if any additional federal assistance will be provided. (Fortunately, this budget fully funds education for the entire year, effectively taking it, so devastated by the 2011 cuts, off the chopping block.)
If Toomey succeeds in cutting off additional funding to states, the result will be a deeper and longer recession. As has been documented, the federal stimulus response to the Great Recession ended prematurely, and thereby, prolonged the recession.
We can’t afford to repeat that with our current crisis. Federal relief money used for direct aid in the form of unemployment, cash, SNAP and other emergency assistance has the greatest positive effect as it will be injected right back into the state’s economy.
What is Toomey’s real agenda here? Under the guise of promoting responsible spending for states, he is advocating for federal inaction that will lead to severe and across-the-board state cuts in education, healthcare, childcare, and environmental protection.
And austerity, by any means necessary (even in the face of an unprecedented global pandemic), just so happens to be the same goal that the Right has been advancing for years.
Diana Polson is the senior policy analyst for the Pennsylvania Budget & Policy Center, a progressive think-tank based in Harrisburg.