Financial relief for overburdened state and local governments was one item that was missing from the massive year-end stimulus package. Democrats had initially requested about $1 trillion in direct relief for state and local governments and had reduced the request to around $160 billion during negotiations. The provision was excluded entirely from the year-end package, but would have provided federal assistance to help fill budget gaps.
Some state and local government authorities have already announced that they’ll soon be required to make cuts, including job cuts — leading to calls for prioritizing state and local government relief in the next round of stimulus funding.
We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about prioritizing financial relief for state and local governments in the next round of COVID-19-related stimulus funding.
Below is a summary of the debate that ensued between the two professors.
Bloink: We need to get aid to struggling state and local governments — this should be a top priority in the next round of stimulus funding. Even the most well-managed state and local governments are facing massive shortfalls. And remember that state and local governments, unlike the federal government, are required to balance their budgets. All of this comes at a time when taxpayers are depending upon state governments to provide assistance more than ever.
Byrnes: State and local governments are struggling just like everyone else. But prioritizing state and local government stimulus relief isn’t the best way to get the economy back on track. The federal government should prioritize offering assistance to individuals and small businesses. That eases the burden on state and local government resources as more people rely on federal aid.