Politico

Georgia sweep renews blue state hopes for federal cash


SACRAMENTO — Impending Democratic control of Washington is energizing governors hoping to tap the federal piggy bank to help balance their budgets.

The bailout that Republicans squelched last year now appears within reach. The Georgia runoff victories of Democrats Jon Ossoff and the Rev. Raphael Warnock give Democrats 50 seats in the Senate and a tie-breaking vote in Vice-President elect Kamala Harris.

The election results come as a particular relief to New York Gov. Andrew Cuomo and New York City Mayor Bill De Blasio. The two Democrats have been counting on the money to close their budget gaps despite dimming prospects under a divided Congress. Cuomo this week accused Republicans in Washington of having “taken money out of this state and sent it to Republican states as a pure political exercise,” referring in part to eliminating the state and local tax deduction.

“That was a function of the Senate and the president and they are both gone,” Cuomo said Wednesday. “And today Washington theft ends and compensation for the victims of the crimes of the past four years begins.”

California also has renewed optimism. The state has a rare pandemic surplus but is still struggling to reopen schools, keep businesses afloat and relieve hospitals that are overwhelmed by Covid-19 cases.

“I think the winning of the two seats puts a huge amount of wind in our sails,” said Phil Ting (D-San Francisco), who chairs the California Assembly’s budget committee. “We go from an administration we have to fight, and a Congress we have to fight, to a Congress that will be helping not only the state of California but all of our cities.”

States and cities sought $500 billion in relief during the last round of stimulus talks, but the money never materialized due to GOP opposition. De Blasio said he hoped President-elect Joe Biden would use a New Deal-type model to stimulate the economy and help New Yorkers as early as next month, along with increasing FEMA reimbursement to 100 percent for every part of the country that was afflicted by the pandemic, retroactive from last spring.

“It makes no sense, in an international pandemic, to make localities pay for the kinds of expenses that are supposed to be covered by FEMA, when localities have lost revenue, massive amounts of revenue, because of this crisis,” he said at a briefing Wednesday.

Congress already has delivered substantial sums of pandemic aid to states, cities and counties through the CARES Act, FEMA reimbursement, school relief funds and other programs. California alone has received nearly $30 billion, not counting expanded unemployment aid or funds from the latest stimulus package, according to its nonpartisan Legislative Analyst’s Office.

But governors and big city mayors have since last spring been calling for more help, including direct aid with fewer strings, which powerful Republicans have worked to block. The evolving budget pictures for states like California became another obstacle for negotiations.

Senate Majority Leader Mitch McConnell last month went so far as to characterize the money as “a slush fund” for California Gov. Gavin Newsom, a reference to the state’s projected $26 billion budget surplus thanks in part to a banner year from its high-flying tech sector.

Newsom couldn’t resist a spicy retort Wednesday on Twitter: “Senate Minority Leader Mitch McConnell has a nice ring to it.”

Democratic control of the Senate does not guarantee that future spending bills will include direct aid to states and local governments. Democrats have newfound leverage, but any stimulus package would likely require 60 votes to avoid a Republican filibuster, and Democrats will have just 51.

And while New York Democrats are bullish on a deal, other state governments are wary of banking on help from Washington.

In cash-strapped Florida, whose Legislature is dominated by Republicans, the idea of a new federal stimulus package has never driven budget talks.

The state is facing a $1.9 billion budget gap headed into the March start of the 2021 legislative session, but leaders have consistently brushed off talk of assuming another round of federal stimulus cash will come.

“We never base assumptions on our budget based on what might take place,” House Speaker Chris Sprowls, a Tampa-area Republican, told reporters in November. “We will certainly be watching and anxiously waiting to see what the federal government will do…but as we come into the new [legislative] session, we will look to trim the budget in any places we need to make up for any kind of shortfall.”

Democratic policymakers in California say they don’t plan to put the state’s budget planning on hold as they wait for Congress to act — including Newsom’s proposals to fund an array of pandemic relief initiatives. But Ting said he hoped Washington’s new Democratic majority would allow the state to backfill some of the $14 billion in cuts made to the budget last year, such as delayed payments to schools and onetime cuts to the University of California and California State University systems.

Newsom is preparing for Friday’s unveiling of his budget proposal for the upcoming fiscal year. The governor has already previewed some elements: a $2 billion incentive for elementary schools that return to in-person learning in February; $4.5 billion in grants, tax credits and other help for businesses; and $2.4 billion in $600 cash grants for low-income workers.

H.D. Palmer, spokesperson for Newsom’s Department of Finance, said the Georgia election results have budget officials hopeful for more federal aid but will likely not lead to major restructuring of the state budget. Palmer said federal money could potentially replace the $300 million in state dollars that Newsom has proposed for the state’s vaccine rollout.

“By the time the budget had to be locked down, we certainly didn’t know what the final composition of the Senate was going to be,” Palmer said. “That said, we certainly believe that the forecast is much improved with the new administration taking office. The message from the president elect, in terms of additional assistance, was that help is on the way.”

Transit agencies hit by plummeting fares and higher expenses during the pandemic are also more optimistic about additional relief from Washington.

Transportation officials in California, who estimate the state’s transit agencies will need at least $1 billion by the end of 2021, plan to appeal for more federal funding before asking Newsom to tap the state’s budget surplus.

“The state may not want to lead with investments in public transit if there is the potential for the federal government to come through with another round of emergency relief,” said Michael Pimentel, executive director of the California Transit Association. “We’ve already seen signals from President-elect Biden, Minority Leader Schumer and Speaker Pelosi that the last round of emergency relief was a down payment.”

Florida Gov. Ron DeSantis, a first-term Republican, must deliver his budget proposal by the end of January, which means his budget office is putting the final changes on the spending plan as Congress potentially considers another round of stimulus. His office has expressed recent concerns about the state’s pandemic-driven revenue falloff, but said Thursday it wouldn’t count on any potential federal stimulus to build its budget.

Last month, economists from DeSantis’ office used a normally mundane revenue estimating meeting to — at times angrily — push legislative economists to approve more optimistic revenue forecasts.

At the urging of DeSantis’ team of economists, the group ultimately approved a revenue projection that was $600 million bigger than a previous August estimate. It still leaves Florida with an estimated $2 billion budget gap headed into budget-writing season.

Anna Gronewold, Amanda Eisenberg, Matthew Dixon, Debra Kahn and Kellie Mejdrich contributed to this story.

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