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Across the country, state and local governments continue to provide vital services, such as running coronavirus tests, processing unemployment applications, ensuring the welfare of children who may be neglected or abused, patrolling highways and waterways, repairing roads and thousands of others that we often take for granted.
The novel coronavirus, and the economic downturn that it precipitated, has increased the demand for many of these services at the same time that state and municipal governments are seeing a sharp decline in revenues, as income and sales tax payments, which make up 85 percent of Maine’s revenue, have declined.
Nationally, state revenues are expected to decline by $650 billion in the next two years, according to projections from the Center for Budget and Policy Priorities.
Unlike the federal government, states must balance their budgets and cannot run a deficit. So, to fill this financial shortfall, states would be forced to dramatically cut services and their payroll. In addition to leaving people without essential services, such a path could prolong the recovery from the recession caused by coronavirus and restrictions put in place to slow its spread.
Only one entity has the resources to avoid this catastrophic — and unnecessary — outcome: the federal government. While we’re not fans of running up the deficit, this is an unprecedented time and federal financial assistance specifically for state and municipal governments is overdue.
Maine faces an estimated $1.2 billion revenue shortfall in the next fiscal year, according to a report published last week by the left-leaning Maine Center for Economic Policy. The center calculated that the state will see a 30 percent revenue decline in the fiscal year ending June 30, 2021, as income and sales tax revenues are falling dramatically as a result of the unprecedented economic slowdown caused by the coronavirus.
“If left unaddressed, the unprecedented shortfall will force the state to make painful cuts that will hurt Maine families and make the recession worse — including widespread layoffs, cuts to education and health care, and reductions in state services and investments when they are needed most,” Sarah Austin, a policy analyst at the center and the report’s author, said in a press release.
“Congress must meet the severity of this fiscal crisis with substantial relief to protect families and state governments facing economic catastrophe,” Austin said.
One in six Maine workers is employed in the public sector. In addition to providing vital services, these workers make significant contributions to the economies of their communities and the state. Some Maine municipalities have already started furloughing or laying off employees.
So, just as Congress quickly allocated $2.2 trillion to help private businesses make it through the coronavirus pandemic, lawmakers should also direct money to states and municipalities to avoid needless layoffs of public-sector workers and cutbacks in public service.
As a former governor, Sen. Angus King has been vocal in calling for more aid to states and municipalities, and for more flexibility in how the public sector can spend that money. As part of the CARES Act, for example, state and local government were allocated $150 billion. But restrictions on those funds have meant that states and communities can’t use them to make up for shortfalls in funding for ongoing programs and services.
“States services — from hospital resources, to nutrition programs, to provision of PPE for first responders — are under tremendous strain. At the same time, state revenues have plummeted due to rapidly declining commerce, leaving states with the intolerable choice of raising taxes or cutting services. States should not need to choose either of these alternatives,” King wrote last week in a letter to Senate leadership.
Despite early resistance to a funding package to help state and local governments — including Senate Majority Leader Mitch McConnell suggesting last month that it would be better for states to go bankrupt — bipartisan support is building for such a funding package, which could be more seriously considered in Congress beginning this week.
All four members of Maine’s congressional delegation signed on to a letter to President Donald Trump emphasizing the importance of such federal aid.
“The economic situation presented by our state and local governments is alarming,” the state’s congressional delegation wrote in a May 4 letter to the president. “They are facing revenue shortfalls and having to reduce or suspend community services in the midst of this crisis.
“We must work together to help all of our communities using a variety of actions, including federal assistance. When we provide federal assistance, it should reach all of our communities including those that are small and rural, be flexible to meet state needs, and be geared toward all concerns related to COVID-19,” they added.
Just as Congress helped private industry weather the unprecedented impacts of the coronavirus, it needs to make sure states can make payroll and continue to provide the services Americans need to protect their health, their safety and their families.