Gavin Newsom wants $1 trillion COVID-19 aid package for states. How did he get that number?
Gov. Gavin Newsom wants Washington to approve a $1 trillion package of economic assistance for states and local governments that are suddenly seeing huge deficits because of the coronavirus-induced recessions.
He’s in for a big fight.
Newsom’s proposal provides guidelines as to how the money could be allocated, but it attaches no specific numbers. That could prove to be a problem for Washington lawmakers as conservatives are wary of spending a lot more on such aid.
But clearly, federal money would help increasingly strapped state and local governments in a big way.
In California, Newsom has predicted adjustments to his budget when he presents revisions May 14 that could reach tens of billions of dollars. That could lead to cuts in social services and layoffs for public employees like teachers, police and firefighters.
Federal action won’t be final by Newsom’s next budget announcement. It’s uncertain when a new aid package could be ready for Congress’ consideration.
Newsom’s request would involve spending in five areas hit hard by the coronavirus outbreak, according to a letter he sent to House Speaker Nancy Pelosi last month:
▪ Health. Double the just-enacted increase in federal payments to a state for medical services, and keep it in place as long as unemployment remains high.
▪ Unemployment. Continue the extra $600 a week Cnongress made available to unemployed workers, now scheduled to end at the end of July, until the jobless situation improves.
▪ Small business. Expand the already enacted coronavirus relief program and clarify guidelines. The Paycheck Protection Program, designed to help businesses with fewer than 500 employees, has been plagued by lack of funds and uncertainty about who is eligible.
▪ Safety net. More help for food aid, housing and homeless programs.
▪ Education. More help for child care, grants to help lower income students attend college and broadband for all.
How Newsom got to $1 trillion
H. D. Palmer, deputy director for external affairs at the state Department of Finance, said the administration arrived at the $1 trillion price tag by estimating California’s projected decline in tax revenue and increased costs associated for safety net programs like Medicaid. The administration also assumed no reduction in school funding.
It then took that projected California impact and extrapolated what Newsom administration officials believe would be a nationwide figure. California’s nearly 40 million residents make up about 12 percent of the U.S. population.
It’s unclear how much of a $1 trillion plan California would receive. The $150 billion coronavirus federal aid plan approved March 27 distributed funds based on population, and the state was supposed to get an estimated $15.3 billion.
Other advocacy groups have floated different numbers for any aid package.
The National Governors Association has asked lawmakers for $500 billion, a figure it developed by looking at projected losses across major categories of state revenue. The National Association of State Budget Officers projects a 20 percent drop.
The governors association then incorporated data and projections from elsewhere, including Moody’s and the Congressional Budget Office before releasing its recommendation.
House Speaker Pelosi has suggested $1 trillion could be needed for state and local aid. She has said she used that number by combining what she has learned from state and local interests about how the outbreak is affecting them.
“You have heard a figure of $500 billion. Municipalities and counties have a similar figure, but again, we want to relate it to outlays and lost revenue,” she said at her news conference Thursday, without mentioning Newsom. “We are not going to be able to cover all of it, but to the extent that we can keep the states and localities sustainable, that is our goal.”
The funding, she said, could be for as long as three years, “maybe even four in certain cases.”
‘Free money’
What concerns many budget watchdogs, though they say such aid appears necessary, is the lack of precision behind the numbers.
“What we’re seeing is people picking numbers and people picking multiples,” said Maya MacGuineas, president of the nonpartisan Committee for a Responsible Federal Budget.
Some fear an overly political process. “When free money is being given away people don’t stop and say, ‘Not me, please,’’’ said Mark Mazur, director of the nonpartisan Tax Policy Center in Washington and a former Treasury Department official.
Newsom insisted his plan was sound. “We didn’t just throw out a number. We broke it down,” he told a news conference Friday.
Senate Majority Leader Mitch McConnell of Kentucky, who controls the Senate agenda, said he is open to discussing a package. But has also been wary of any plan, saying often that the money is too often bound for states that wasted funds over the years.
“The point is we are not interested in borrowing money from future generations to send down to states to help them with bad decisions they’ve made in the past unrelated to the coronavirus epidemic,” he said last week on Fox News’ “America’s Newsroom.”
“If we do another rescue package and we may, we need to take our time, do it right and it needs to include these liability protections so that all these brave workers and brave businesses that’ll be reopening are not subject to this second epidemic of litigation,” McConnell added.
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