A fight over funding for state and local governments is emerging as an early flashpoint in talks over another coronavirus relief bill.
The clash — which pits Senate Majority Leader Mitch McConnell (R-Ky.) against House Speaker Nancy Pelosi (D-Calif.) and Senate Minority Leader Charles Schumer (D-N.Y.) — is raising fresh questions about the ability to keep Congress’s response to the coronavirus bipartisan.
Congress has already appropriated nearly $2.8 trillion to combat the severe economic and health impact of the coronavirus, as 26 million people have filed for unemployment and nearly 51,000 people have died in the United States, according to Johns Hopkins University.
But Democrats are pledging to get more help for state and local governments in the phase four coronavirus relief bill that could pass Congress as soon as next month.
“There will not be a bill without state and local, OK?” Pelosi said when asked about the potential that it will be left out.
Pelosi has characterized it as the “centerpiece” of the next bill but declined to say how much Democrats will push for. She told reporters during a press conference that the number is probably “equivalent to what we’ve done for small businesses.” Congress has provided nearly $660 billion in loans to businesses through the Paycheck Protection Program.
That puts Democrats squarely at odds with McConnell, who set off alarm bells among governors and lawmakers from hard-hit states when he said this week that states should be allowed to declare bankruptcy as they seek more money from the federal government to deal with the economic fallout from the coronavirus.
“I would certainly be in favor of allowing states to use the bankruptcy route,” McConnell told radio host Hugh Hewitt.
“My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that. That’s not something I’m going to be in favor of,” he added.
McConnell has positioned Republicans as wary of additional funds for state and local governments, saying the idea would have to be “thoroughly evaluated” within his conference.
The issue is just the latest point of tension between McConnell and Pelosi, who clashed earlier this month over whether another coronavirus relief bill was even needed.
Pelosi, on Friday, asked reporters, “Speaking of Mitch, what’s gotten into him?”
“The president is asking people to inject Lysol into their lungs, and Mitch is saying that states should go bankrupt. It’s a clear, visible within 24 hours of how the Republicans reject science and reject governance,” she said.
The two are on different timelines as they contemplate another round of federal help. Democrats want to have a bill ready to go by the time they return to the Capitol as soon as May 4, indicating that they expect to take the lead on the legislation.
“Speaker and I will begin rolling up our sleeves and working on that big, broad [phase four bill] very soon and very quickly. … At the top of the list is a big robust state and local plan,” Schumer told reporters.
But McConnell is calling for lawmakers to “pause” while they evaluate the effectiveness of the nearly $2.8 trillion already appropriated by Congress and the impact the spending will have on the debt.
“We need to push the pause button here and remember that the only ultimate way out of this dilemma is for the economy to slowly begin to open back up,” he told WYGE, a Kentucky radio station.
McConnell’s skepticism about providing more funding for state and local governments comes after both President Trump and Treasury Secretary Steven Mnuchin have indicated that they are open to including additional aid in whatever coronavirus-related legislation Congress passes next.
Trump, in a tweet urging Congress to pass the interim bill, said that he was then ready to “begin discussions on the next Legislative Initiative with fiscal relief … to State/Local Governments for lost revenues from COVID 19.”
He added during a White House briefing on Thursday that he had spoken to McConnell and “a lot of different senators.” Trump described himself as “open” to providing more financial help for state and local governments.
“We’re looking to do what’s right for a particular state. And we’ll see what happens. But it’s certainly the next thing we’re going to be discussing because some states … have not done very well for many years, long before the virus came,” Trump said.
Schumer predicted that there would ultimately be enough support for more money to be included in Congress’s next bill, arguing that McConnell’s statement is “out of the mainstream.”
“We can force it to happen in the [phase four] bill, and I think there is enough bipartisan support, despite what McConnell did, to get that done,” Schumer told NPR.
Some Republicans, such as Sens. Bill Cassidy (La.) and Rob Portman (Ohio), have indicated they are open to more help for state and local governments.
State officials warn that without additional federal assistance, they face deep budget holes as businesses have scaled back or closed altogether, depriving them of a tax base. Unlike the federal government, every state but Vermont has a requirement to maintain a balanced budget. Current law doesn’t allow states to declare bankruptcy.
Maryland Gov. Larry Hogan (R) and New York Gov. Andrew Cuomo (D), the chairman and vice chairman of the National Governors Association, are asking for an additional $500 billion “in direct federal aid that allows for replacement of lost revenue.”
Congress included $150 billion for state and local governments in last month’s $2.2 trillion package. But the $484 billion bill that passed this week did not include more funding amid warnings from Republicans that including it would prevent the bill from easily passing the Senate.
One idea being floated by GOP senators is to give states and local governments more flexibility with how they use the $150 billion. Sen. John Thune (S.D), the No. 2 Republican in the Senate, said the rules around the initial tranche of money could be “broadened.”
“There’s not enough money in Washington or in the world for that matter to solve all the problems we have,” Thune told C-SPAN. “There is $150 billion in the pipeline already, which could be broadened to give state and local governments more flexibility in how it’s used. But I think we need to see, once those dollars get out there, how effective they are … before we start adding to it.”
Several GOP senators have aligned themselves with McConnell, arguing that they don’t want to provide “bailouts” for states.
“I don’t have an interest in bailing out states like California, Illinois, New York,” Sen. Rick Scott (R-Fla.) told reporters.
Sen. Thom Tillis (R-N.C.) said that he would not support a “broad-based bailout,” and that was “more or less aligned with Leader McConnell on the issue.”