Instead of bailing out states at the federal level, Senate Majority Leader Mitch McConnell said he prefers states struggling with high public employee pension costs to declare bankruptcy.
“I would certainly be in favor of allowing states to use the bankruptcy route,” he said Wednesday. “It’s saved some cities, and there’s no good reason for it not to be available.”
McConnell said that states have gotten themselves into a mess with their pension programs. “There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations,” he said.
House Speaker Nancy Pelosi told Bloomberg Television Wednesday a “major package” of aid for state and local government will be in the next stimulus legislation considered by Congress. Trump has said the states would need assistance.
“I think most Republicans agree too, and Democrats,” Trump said. “And that’s part of phase four.”
McConnell plans to push back against the federal bailout of state governments. “I said yesterday we’re going to push the pause button here, because I think this whole business of additional assistance for state and local governments needs to be thoroughly evaluated,” McConnell added.
The National Governors Association said states and municipalities will need $500 billion in aid to deal with the coronavirus crisis. McConnell called for ample discussion among Republican senators on how to send aid to state and local governments.
Not since the Great Depression has a state defaulted on its debt. During the last recession, only a handful of cities went bankrupt, because they raised taxes. This time around, states and cities are asking Congress to provide aid to make up for the lost taxes due to the lockdown. Governors have requested $500 billion and cities and counties have asked for $250 billion.