Congress needs to fix the coronavirus stimulus it passed last month or it will spur states to go on spending binges to use up the cash, even if the money doesn’t actually help control the pandemic, a coalition of taxpayer groups and free-market think tanks warned in a letter last week.
They said the way the law was written, the money doesn’t help states plug existing budget gaps that resulted from the virus, but instead demands they find new spending they can attribute to the virus.
They warned the result will be “budgetary gluttony” as local officials rush to find new spending to use up their new money.
“We ask Congress to allow states the ability to use their relief assistance in the most prudent and least disruptive way possible,” they said in an April 13 letter, led by the John Locke Foundation in North Carolina and the Platte Institute in Nebraska, and signed by 23 other groups.
The $2.2 trillion recovery included $150 billion aimed at helping states and local governments fight COVID-19.
Each state gets at least $1.25 billion, with the amount increased depending on population. Localities get a portion of the cash.
“As written, however, the fund provides little actual relief for state budgets but instead all but compels them to devise new spending that can be attributed to the Coronavirus Disease 2019,” the groups said.
They suggested Congress, in upcoming legislation, allow states to use their money to offset lost revenue that would normally fund their basic operations, or to provide their own stimulus tax relief to individuals and businesses, on top of the federal stimulus.