Pa.’s Casey, Toomey split as U.S. Senate spars over state bailouts

(*This story has been updated to include new information from U.S. Sen. Pat Toomey’s, R-Pa., office)

WASHINGTON — Pennsylvania’s two United States senators are divided over a hotly contested issue on Capitol Hill: whether to provide more federal aid for ailing cities and states.

The issue is at the center of the next round of negotiations over federal spending in response to the coronavirus pandemic. Many state and federal lawmakers on both sides of the aisle want to infuse states with cash, while some high-profile Republicans have bristled at the idea of state and local bailouts. 

Democrat U.S. Sen. Bob Casey, the Keystone State’s senior senator, backs a proposal to provide state and local governments with $500 billion to help them balance their budgets during the pandemic. 

“This isn’t about some budget number,” he told the Capital-Star in an interview. “This is about public safety.”

But GOP U.S. Sen. Pat Toomey isn’t ready to jump on board.

Toomey wants to “see what’s working and what our needs really are” before moving to the next phase of coronavirus legislation, his spokesman Steve Kelly said. 

“Government spending,” he added, “can never be a substitute for a functioning economy that supplies the tax revenue states and municipalities really need.”

As a result of the pandemic, state and local governments are facing massive revenue losses that threaten funding for things like police, fire departments, schools, trash collectors, food banks, libraries and museums.

Gov. Tom Wolf said the state could see up to $5 billion in deficits, according to the Pittsburgh Post-Gazette. Unlike the federal government, Pennsylvania must balance its budget.

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Cities such Allentown, which is in Toomey’s Lehigh Valley backyard, are expected to face the most immediate fiscal impacts of the pandemic, according to a recent report by the Brookings Institution. That’s because it relies heavily on income taxes, which are more sensitive to declines in employment than property taxes and other sources of revenue.

Philadelphia and Pittsburgh will likely feel the effects later than Allentown because they rely less heavily on income taxes, the report found.

Another factor affecting cities’ fiscal outlook is their share of workers in industries experiencing significant employment declines, according to the Brookings report.

Divisions among party leaders

Pennsylvania senators’ different approaches to the issue reflect divisions among their leaders.

U.S. Senate Majority Leader Mitch McConnell, R-Ky., has characterized aid to cities and states as a “blue state bailout” and said last week he would be open to allowing states to file bankruptcy.

He changed course this week, saying he would be open to such aid in exchange for legal protections for businesses and employees, according to Politico. 

Democratic leaders panned the pitch, indicating a coming clash over the issue. 

Toomey told reporters last week that he was open to the idea of allowing state bankruptcy but has concerns about its constitutionality, according to his spokesman.

Toomey and other Republicans have also voiced concerns about further deficit spending.

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Congress has already approved some $3 trillion in response to the pandemic, and the Federal Reserve has authorized new lending to individuals, businesses, municipalities and states, Kelly noted. State and local governments will also benefit from separate federal funds that subsidize transportation, schools and other programs and services, he said.

Casey said deficit fears shouldn’t stop Congress from coming to the aid of cities and states. “No one wants to do that forever,” he said, “but there’s no other option.”

He called McConnell’s bankruptcy comment “insulting” but said it won’t necessarily block support for cities and states. “There’s going to be substantial pressure on Republicans in the Senate to do something, and there should be,” he said. “If anything, Democrats should increase that pressure.”

The Senate is slated to reconvene on Monday. House leaders reversed a plan to do the same and have not yet set a date to reopen.

President Donald Trump said last week he would push for state and local aid in forthcoming coronavirus legislation, but seemed to weaken his stance this week. 

“Why should the people and taxpayers of America be bailing out poorly run states … and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help,” he tweeted Monday.

Democratic U.S. Reps. Matt Cartwright, D-8th District, and Susan Wild, D-7th District, meanwhile, called for more aid to cities and states on a conference call with reporters on Wednesday.

“We’ve got to make sure that … municipalities are able to get the relief that they need,” Wild said.

*In March, Congress set aside $150 billion in its $2.2 trillion coronavirus package to help cities and states respond to the pandemic. Of that, Pennsylvania has received $5 billion, according to Toomey’s office.

The legislation didn’t allow officials to use the funds to plug budget shortfalls and only provided direct aid to municipalities with more than 500,000 people, such as Philadelphia.

Democrats sought additional funding for cities and states in a $484 billion coronavirus package approved last week, but Republicans balked. 

U.S. House Speaker Nancy Pelosi, D-Calif., pledged to continue to fight for the funding. The next coronavirus package “must contain … funding for state and local governments to pay frontline workers,” she told reporters Tuesday. 

The proposal Casey backs would create a $500 billion “stabilization fund” for state and local governments. It would divide the money into three equal tranches — one that would allocate funds by population, another by infection rate and a third by revenue losses.

It comes in response to a recent plea for help from the National Governors Association. 

Under the plan, all states and the District of Columbia would receive at least $1.25 billion, and the money could be used to address revenue losses. Cities and counties with more than 50,000 people would be eligible for aid.