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It’s budget season in Maine and that means that municipal leaders across the state are drafting spending plans for the next fiscal year. While the coronavirus pandemic is far from over, it has already depressed local revenues, leaving town officials the difficulty of preserving needed services without big tax increases.
Many town leaders are proposing to eliminate jobs, including in police and fire departments, while also raising taxes.
States face similar budget balancing challenges. Maine could see lost revenue as high as $3 billion in coming years because of the virus, Gov. Janet Mills said in a letter to the state’s congressional delegation.
These challenges could be eased with help from Congress, which has several bills before it — including bills sponsored by Sens. Susan Collins and Angus King — to better equip states to weather the economic consequences that have accompanied the pandemic.
The U.S. House of Representatives last month passed a $3 trillion package that included financial support for state, local and tribal governments. There has been no action in the Senate. Republican leaders say they’ll wait until at least late July to consider such legislation.
This is irresponsible.
Both Maine senators have supported bills to send financial help to states, municipalities and tribes, although at lower funding levels than the House-passed legislation.
Last month, Collins joined a bipartisan group of senators in pushing for targeted relief to state and local governments. The bill introduced by six senators, called the State and Municipal Assistance for Recovery and Transition (SMART) Act, would provide $500 billion in emergency funding to states, counties and communities, while prioritizing assistance to the areas with the greatest need. It also gives the states flexibility to use the money to plug budget holes.
Under the bill, Maine would receive about $2 billion, with towns and counties each receiving $333 million, without the money going through Augusta first.
“Congress must act now to protect vital services and to prevent widespread furloughs of state and local public servants, including police, firefighters, medical professionals, and educators,” Collins said in a statement.
More recently, she has criticized Senate leadership for delaying action on financial support for state and local governments.
“Timing is a very legitimate concern,” Collins said in an interview with the Bangor Daily News.
“My preference is that we do this before we break for the July 4 recess,” she said.
While Senate leadership drags its feet, King has co-sponsored legislation to ease restrictions on the funding states have already received under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Maine has received $1.25 billion under the CARES Act. This funding is earmarked to cover the costs of responding to the pandemic, not to offset revenue shortfalls, and no Maine cities are large enough to qualify for other federal dollars.
Certainly, state government and other entities in Maine have incurred costs in responding to the pandemic and the state officials need to do a better job of more quickly allocating that money.
But those costs could be dwarfed by the loss of revenue, most of it from taxes, that has come as a result of the shutdown of much economic activity, which slowed the spread of the virus. In addition to allowing the state to use the federal funds to cover ongoing state expenses, Mills called for additional financial support for Medicaid to help unemployed workers maintain their health insurance and to ensure payments to health care providers.
Allowing states more flexibility to use the CARES Act money to cover revenue losses, which will enable the continuation of state-funded programs and services, is necessary, especially as the Senate delays consideration of additional financial support.
“The pandemic’s economic fallout has drastically reduced tax revenue for state and local government, creating unexpected deficits and leaving these governments with the choice of raising taxes or firing essential personnel; neither of these options is acceptable,” King said in a statement. “That is why the federal government must provide relief to ensure communities have the resources they need to weather this pandemic.”
In the absence of a more comprehensive aid package, quickly passing legislation to make such improvements to the CARES Act could mirror what Congress did last week to make the Paycheck Protection Program more effective.
This two-step approach of making it easier for states to use existing CARES Act funding to stave off financial disaster and then passing a significant stimulus package for states, municipalities and tribes is a responsible reaction to the worsening financial disaster facing these governments.