The Pandemic Leaves Many States In Big Budget Trouble

Jun 23, 2020
Originally published on June 23, 2020 3:58 pm
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SARAH MCCAMMON, HOST:

Billions of dollars, by one estimate $200 billion - that's how much revenue states expect to lose over the next two years due to the coronavirus pandemic. Add to that the billions that states have already spent on their responses to the virus, and many are in big budget trouble. We're just about a week away from the start of the new fiscal year in most states, so let's check in with a few states to find out what these giant losses will mean. Abigail Censky is with us from member station WKAR in East Lansing, Mich., Sergio Martinez-Beltran from member station WPLN in Nashville, Tenn., and Nicole Nixon from CapRadio in Sacramento, Calif. Thank you all for joining us.

NICOLE NIXON, BYLINE: Thanks for having us.

SERGIO MARTINEZ-BELTRAN, BYLINE: Thank you.

ABIGAIL CENSKY, BYLINE: Of course.

MCCAMMON: So, Nicole, let's start with you in California because that state is facing a huge budget hole. It's a big state, of course. And there is an estimated $54 billion revenue shortfall. That's a big number.

NIXON: Yeah, it's a huge budget hole. Lawmakers and the governor just finished negotiating over the budget. The big disagreement between them was about what to cut. Gov. Gavin Newsom proposed deep cuts to schools, child care programs, also some health care programs, including one program that helps keep seniors in their homes. But lawmakers argued that it's really important to keep those services intact right now in order to keep people out of nursing homes, you know, where the coronavirus has been known to spread rapidly. So here's State Assemblyman Phil Ting. He is chairman of California's Assembly Budget Committee.

(SOUNDBITE OF ARCHIVED RECORDING)

PHIL TING: We are at a time where people need their government and their services more than ever. So we shouldn't, as an institution, as a state, retreat. In fact, I think we have to do the opposite. We have to go help.

NIXON: So Democratic lawmakers really argued that the coronavirus has exacerbated a lot of issues relating to health, education and poverty right now. And they really don't want to add to the damage by cutting programs.

MCCAMMON: And what about the money that the state's kept to the side through the past few good economic years? Is there a lot of money in the rainy day fund, as they're often called?

NIXON: Yes. California has been doing really pretty well before the pandemic hit the state's finances really hard. So there's about $20 billion in the rainy day fund and other reserve funds. State leaders obviously really want to dip into that, as they say it is raining now. But they're also conscious about budgeting that to last a couple years - two or three - because we really don't know how long this downturn will last. And another thing is that California is waiting to see about any additional relief money from the federal government. Gov. Newsom's really pushing for that hard. So the big question is, what do they do if that money does not materialize?

MCCAMMON: Speaking of which, Abigail, money from the federal government did materialize in Michigan, which got billions in stimulus funds from the CARES Act. But Gov. Gretchen Whitmer has been very vocal about saying that the state needs money to stay afloat. What's going on there? Was the stimulus just not enough?

CENSKY: That's right. There are kind of two tracks of problems here in Michigan. One is short-term. We got $3 billion that the state feels like it can't touch without more federal guidance on how they can spend that money. And two, they need about 3 billion more to survive the projected revenue shortfalls for next year. The money that we have has been helpful when it comes to paying for COVID-19 expenses, things like personal protective equipment and testing. And that's what it's designed to do. But the CARES Act money by design can't backfill those budget holes to pay for general state expenses, and that's the same problem in states across the country. On top of COVID expenses, we've lost millions of dollars in taxes and other forms of revenue because economies have been frozen.

MCCAMMON: Michigan's fiscal year ends a little bit later on Sept. 30. But regardless, what is Gov. Whitmer asking for specifically?

CENSKY: So the state got 3.8 billion from the federal government. And the governor has about 880 million in COVID relief bill that's sitting on her desk, and she's expected to sign. But what she really wants is more flexibility for the money that we already have to pay for things like education and state employee salaries and all of the other things we need to pay for. Here she is talking about that.

(SOUNDBITE OF ARCHIVED RECORDING)

GRETCHEN WHITMER: We need additional flexibility and resources from the federal government. We have a $3 billion crisis, and it is because of COVID-19.

CENSKY: And if that's not possible, the governor is asking for more money that can be spent on all of those things to keep the state from running out of cash. And so far, it doesn't look like the U.S. Senate has much of an appetite for that.

MCCAMMON: OK, Sergio, let's move to you in Tennessee. Is the budget picture looking any better there?

MARTINEZ-BELTRAN: Not really. You know, right now things do not look good in Tennessee. And just like you heard in California and Michigan, the budget hole is creating a lot of worry over education funding in particular. I was at the Capitol until the early hours of the morning Friday as lawmakers finalized deep cuts to the budget. Any previous spending priority is totally off the table, such as a K-12 mental health fund and implementation of school vouchers. In Gov. Lee's State of the State address in January, you know, he promised teachers in Tennessee a pay raise. They are some of the least paid teachers in the country. Here he is back then.

(SOUNDBITE OF ARCHIVED RECORDING)

BILL LEE: This year I'm proposing the largest investment in K-12 teacher salaries in Tennessee history. My budget sets aside...

(APPLAUSE)

MARTINEZ-BELTRAN: You can hear the governor was interrupted by applause. He actually got a standing ovation from the crowd at the time. But those races certainly won't happen this year or probably in years to come. Also cut was the proposal from earlier this year to give women who are enrolled in Tennessee's version of Medicaid postpartum health care for a year. Right now they're only covered through pregnancy and two months after giving birth.

MCCAMMON: Kind of amazing to hear, you know, just the beginning of the year how different the picture was looking there in Tennessee and everywhere else, really. What's been the reaction to eliminating those proposals?

MARTINEZ-BELTRAN: Well, Tennesseans, like people all across the country, are really hurting economically from the pandemic. Democrats in the State House did express some concerns specifically over the state depositing more than $500 million in their rainy day fund. Democrats also wanted the state to spend in other proposals, but without additional money from the federal government like Abigail was talking about, lawmakers say that their hands are tied.

MCCAMMON: So all the governors seem to be putting a lot of eggs in one basket, which is waiting for more money from the federal government. But the U.S. Senate seems reluctant to send more funding to the states. Sergio, does the Tennessee state government have a backup plan in case that money just doesn't come through?

MARTINEZ-BELTRAN: Kind of. So the state government has allocated some unrestricted money to be used by cities and counties, but they're really hoping the federal government will either give more money or allow some of the CARES Act money to be used for lost revenue.

CENSKY: Yeah - same here in Michigan. The plan is to stall. They've already added another revenue estimating conference in August. And Republicans in our Republican-dominated state legislature have backed bills that would push back the deadline to submit a budget to our governor by July 1, which leaves schools whose fiscal year begin July 1 in a tough spot.

MCCAMMON: And, Nicole, what about California? Is there a backup plan there?

NIXON: Well, the governor proposed those pretty painful trigger cuts that I mentioned earlier, you know, to health and social services. Instead, lawmakers and the governor all agreed instead to defer billions of dollars in education spending until next year. State universities would also get less money, and there would be some furlough days for state workers if that federal aid does not come through.

MCCAMMON: That's Nicole Nixon from CapRadio in Sacramento, Calif. I've also been talking with Abigail Censky from member station WKAR in East Lansing, Mich. and Sergio Martinez-Beltran from member station WPLN in Nashville. Thank you all so much.

NIXON: You're welcome.

MARTINEZ-BELTRAN: Thanks for having us.

CENSKY: Thank you.

(SOUNDBITE OF MR TWIN SISTER SONG, "LADY DAYDREAM") Transcript provided by NPR, Copyright NPR.

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