Analysis: Urban states come out ahead, rural states get less in Biden's
COVID-19 relief bill
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[February 24, 2021] By
Andy Sullivan and Jason Lange
WASHINGTON (Reuters) - The $1.9 trillion
COVID-19 relief package now making its way through the U.S. Congress
would provide $350 billion to help pandemic-hit state and local
governments balance their budgets, more than twice the amount lawmakers
approved last year.
But not every state comes out ahead: urban, Democratic-led states like
Connecticut, New York and Massachusetts that took drastic steps to stop
the coronavirus' spread would get about three times as much money per
person as they did in the package passed at the beginning of the health
crisis in March.
Rural, Republican-led states including Wyoming, North Dakota and South
Dakota that did less would see less cash.
That's because Congress is giving greater weight to poverty and
unemployment this time as it considers how to distribute money to keep
police, firefighters and other public employees on the job during a
pandemic that has killed more than 500,000 Americans and thrown millions
out of work.
It also reflects the fact that Democrats who control both chambers of
Congress drafted the package for their fellow Democrat President Joe
Biden without Republican input.
Under the new bill, named the American Rescue Plan, 61% of the aid would
end up in states that voted for Biden in November, up from 56% in the
bipartisan CARES Act passed last March.
Reuters examined House Oversight Committee projections on how much
direct fiscal aid each state would receive in the bill, which is set for
a vote in the House of Representatives this week before moving to the
Senate.
It is expected to pass, even if no Republicans vote for it.
The CARES Act distributed $140 billion to state and local governments
based on population, delivering a minimum of $1.25 billion to each
state. That gave the largest per-capita benefits to the states with the
smallest populations, including Wyoming and Vermont. Another $3 billion
was set aside for Washington, D.C., and U.S. territories.
This time around, Democrats have lowered the per-state minimum to $500
million. The remaining $300 billion would be allocated based on
unemployment and poverty levels as well as population. Tribal
governments and territories would get $24.5 billion. Washington, D.C.,
would be treated like a state.
Advocates say the new formula ensures the money goes where it is needed,
as COVID-19's toll has been uneven across the country. Unemployment in
December topped 9% in tourism-dependent Nevada and Hawaii, triple the 3%
in Nebraska and South Dakota.
"This is a more targeted approach," said Michael Leachman, a budget
expert at the left-leaning Center on Budget and Policy Priorities, who
supports additional state and local aid.
Republicans say the bill short-changes states that have imposed fewer
coronavirus-related restrictions.
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A sign thanks essential workers on boarded up building amid the
coronavirus disease (COVID-19) outbreak in Wilmington, Vermont,
U.S., April 19, 2020. REUTERS/Brian Snyder/File Photo
"The real reason for this bill is to send billions to bail out blue-state
governors and reward their harmful lockdown policies," Representative Jason
Smith of Missouri said at a House Budget Committee hearing on Monday.
The new bill would direct roughly $800 per person to Republican-led Utah and
Alabama, which had some of the least restrictive COVID-19 responses, according
to Oxford University researchers.
It would send roughly $1,200 per person to Democratic-led Massachusetts and New
York, among the most restrictive.
Democrats argue that the money should be targeted towards areas that have
suffered the most.
"Since when is unemployment not a legitimate indicator of economic distress?"
Representative David Price, a Democrat from North Carolina, said at the same
hearing.
A DIVISIVE SUBJECT
State and local aid has proven to be one of the most divisive aspects of the
multi-trillion dollar effort Washington has mounted in the past year to fight
the virus and keep the world's largest economy afloat.
Republicans and Democrats both broadly supported small-business loans and direct
payments to families.
But Republicans have balked at providing more aid to state and local
governments. State and local aid was excluded from a bipartisan $900 billion
bill that passed in December.
The National Association of State Budget Officers calculated state revenues
would drop 10.8% in the current fiscal year when compared with pre-pandemic
estimates, affecting Republican-led and Democratic-led states alike.
Some analysts say the Democrats' proposal, which adds up to about $500 billion
when spending for public schools, transit and other aid is included, provides
states with more than they need, however.
"People dramatically overestimated how bad the state and local finances would
be," Stan Veuger, an economist at the center-right American Enterprise
Institute.
Bipartisan groups like the National Governors Association have argued that
further aid is needed to help states deliver health care and education and avoid
further layoffs that could prolong the recovery, though they have not endorsed
specific proposals.
Though the new bill would steer more money towards large states, smaller states
still fare well. Vermont, Wyoming, Alaska and North Dakota, each with fewer than
1 million residents, are still among the top 10 recipients on a per capita
basis.
(Reporting by Jason Lange and Andy Sullivan; Editing by Scott Malone and Sonya
Hepinstall)
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