By Ellie Bufkin, Sinclair Broadcast Group
WASHINGTON (SBG) - Some Republicans are claiming that the $1.9 trillion COVID-19 stimulus plan, dubbed the American Rescue Plan, offers large “bail-outs” to cities and states controlled by Democrats. Director of state and local policy at conservative think-tank The Manhattan Institute Michael Hendrix says that low unemployment rates in several states led by Republican governors kept them from big payouts.
“Some states have seen red, especially those dependent on energy and mining revenue, like Alaska. Declining tourism hurt Florida’s budget to the tune of $2 billion, but the state’s low unemployment means it will miss out on $2 billion in Biden bucks it would otherwise get if aid were simply allocated based on population,” Hendrix wrote in The New York Post. “Nine of the ten states with the lowest unemployment in America are led by Republican governors, and they are the ones punished under the relief bill’s formula.”
The most recent bill will provide just under $200 billion in state and local government funding. Unlike the first two COVID-19 relief bills passed last year, the American Rescue Plan assesses unemployment numbers to decide the amount given in relief. It sets a baseline payout at $500 million per state and then adjusts the remainder of the funding based on the rate of unemployment at the close of 2020. Both relief bills last year paid out money to state and local governments based on populations.
Hendrix says that the Democrat-controlled states with the strictest lockdown orders during the COVID-19 pandemic are receiving the biggest windfall from the stimulus package, which President Joe Biden signed last week.
The U.S. Bureau of Labor and Statistics reports that California currently has the second-highest unemployment rate among the 50 states and the District of Columbia. At 9%, the rate is 3.5% higher than at the same point in 2020, in the early days of the pandemic. It is higher than the 8.2% reported in November.
The Associated Press reported in January that despite California’s high unemployment rate, the state was “swimming in money.” Democratic Gov. Gavin Newsom reported a $227 billion spending plan that included a $15 billion one-time surplus. California saw a 4.2% increase in general fund revenues in 2020 than in 2019. Newsom pointed to the highest earners in the state as boosters of the bottom line, noting a record $185 billion in capital gains income during the pandemic. That income resulted in $18.5 billion in state tax revenue.
“Folks at the top are doing pretty damn well,” Newsom said.
That number helped usher in the biggest budget in the state’s history. But the financial health of the state did not have a bearing on the distribution of funds via the American Rescue Plan, which targeted cities and states with the highest unemployment rate for the largest payouts.
The funds were built into the plan based on unemployment rates reported at the conclusion of 2020, which put populous states on the rebound from the pandemic at a financial disadvantage. Florida, with the third-highest population in the country, is set to receive $17.62 billion while boasting a 4.8% unemployment rate. New York, with 2 million fewer residents, will receive $23.8 billion while reporting an 8.8% unemployment rate.
Adam Andrzejewski, an advocate for government spending transparency and founder of OpenTheBooks, says that the inequity of distribution also extended to tribal governments, who account for a small portion of the population compared to many states with healthier unemployment numbers and large populations.
“Not enough attention has gone to the $20 billion flowing to the tribal governments. Tribal governments have 3 million Native Americans, and that includes the numbers in Alaska and Hawaii,” he said during an interview with The National Desk. “Florida has seven times the population and is getting $2 billion less.”
“Speaker Nancy Pelosi’s House Democrats changed the formula, they changed the allocation from the traditional formula that was based on population to the unemployment rate in the fourth quarter,” he said. “This had the effect of shifting dollars to states like California, New York, Illinois, and New Jersey – states whose governors had their economies more locked down than states like Florida. Florida is the big loser in this. They’ll lose about $2 billion. New York, California, they’ll reap an extra $6 billion on the allocation change.”
Democratic governor of Connecticut Ned Lamont says that the notion that the bill contained a “blue-state bailout” was not true.
“That’s absolutely nonsense don’t give me this blue-state bail-out stuff,” Lamont told Bloomberg Wall Street Week. Lamont said the $4.35 billion stimulus headed for Connecticut would prevent layoffs and help the state confidently set the budget for the next two years. He says that some of that money will be spent on education.
Democrats have said that money set aside for states in previous stimulus packages was too specifically allocated for special programslike Medicaid and prevented states from addressing COVID-19 and economic concerns that were specific to individual states.
“This gives us some certainty to make some investments we need,” Lamont continued, saying that it would give more broad support to residents. “More people can get health insurance.”