Mitch McConnell, Republicans reject ‘blank check’ for governors

Republican lawmakers objected Wednesday to giving governors a “blank check” that could end up in chronically underfunded union pension plans, as Washington tees up another massive coronavirus stimulus package with an eye toward bailing out hard-hit state budgets.

“We’ll certainly insist that anything we’d borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs,” Senate Majority Leader Mitch McConnell, Kentucky Republican, told conservative radio host Hugh Hewitt. He said Congress should “push the pause button” on more emergency aid.

Governors are seeking at least $500 billion from Washington, saying the COVID-19 crisis has left gaping holes in their budgets. New York Gov. Andrew Cuomo said Wednesday that President Trump agreed in a meeting with him a day earlier that states must receive more aid.

“The states are all basically in a deficit situation, and we need funding from Washington,” Mr. Cuomo said. “The president gets it. He says he’s going to work very hard in the next piece of legislation.”

The president, who has been encouraging governors to reopen their states for business, told Republican Gov. Brian Kemp Wednesday that he “disagrees strongly” with Mr. Kemp’s decision to allow hair salons, tattoo parlors and bowling alleys to reopen Friday. Mr. Trump said it’s “too soon” for those businesses to reopen but added that he won’t stop the move, saying governors must make their own decisions.

“He must do what he thinks is right,” Mr. Trump said. “They can wait a little bit longer. Safety has to predominate.”

On Wall Street, stocks rose Wednesday as oil prices stabilized. The Dow Jones Industrial Average rose 456 points, or 1.99%, to close at 23,475.

But the economy could get another shock Thursday when the government reports weekly jobless claims. In the previous four weeks, 22 million Americans lost their jobs because of shutdowns to curb the transmission of the coronavirus.

The House is scheduled to vote Thursday on a nearly $500 billion package that includes $310 billion for the Paycheck Protection Program for small businesses, plus $60 billion for injury disaster loans and grants, $75 billion for hospitals and $25 billion for coronavirus testing. But the measure, approved Tuesday in the Senate, doesn’t include aid for states, which Democrats were demanding.

Some Republican lawmakers say they are wary of sending states money that could be used to fund freewheeling programs that often are legacies of Democratic Party machines.

“Floridians are concerned that we would see our tax dollars maybe go not in response to coronavirus in other states, but to solve some of their other problems,” Rep. Matt Gaetz, Florida Republican, said after emerging from a meeting with Mr. Trump this week. “I think the state of New York had some very significant budget challenges well before the first instance of coronavirus. We don’t want to see a bailout of irresponsible decisions at the state level before the coronavirus, masquerading as a coronavirus response.”

House Speaker Nancy Pelosi said Wednesday that a “major package” of aid for state and local government will be included in the next recovery bill addressed by Congress. She said she had support from the president to include it in the $2.2 trillion rescue package that Mr. Trump signed into law on March 27, but Mr. McConnell blocked her proposal.

Bonded debt for the 50 states totaled about $1.16 trillion in 2019, while unfunded public pension liabilities totaled nearly $5 trillion, according to the American Legislative Exchange Council. States with some of the highest unfunded liabilities include California, Illinois, New Jersey, Connecticut, Kentucky and Alaska.

The Democratic bastion of Philadelphia has one of the most notorious public pension gravy trains in a program called the Deferred Retirement Option Plan. It’s a retirement double-dip that allows city employees to collect their full salaries and their pensions simultaneously during their final four years on the job.

During a voter revolt in 2011 against City Council members enrolled in the pension program, council member Marian B. Tasco was the only incumbent who survived. She won reelection, “retired” for a day, collected a cash bonus of $478,057 under the Deferred Retirement Option Plan, and then served another four-year term with a six-figure salary, all courtesy of taxpayers.

Enrollment in the program has increased in the city, where Democrats outnumber Republicans by a margin of about 6-to-1. As of April 2019, the program awarded more than 12,400 municipal employees a total of $1.5 billion in cash bonuses over 20 years, or an average of $122,359 each, Philadelphia magazine reported.

The city’s pension plan is funded at about 45% and is classified as “severely distressed.” It owes pension payments to more than 60,000 active and retired employees and their beneficiaries.

It’s exactly the kind of largesse that Republican leaders in Congress say they don’t want to reward with emergency disaster aid.

“We’re not interested in solving their pension problems for them, we’re not interested in rescuing them from bad decisions they’ve made in the past,” Mr. McConnell said on Fox News. “We’re not going to let them take advantage of this pandemic to solve a lot of problems that they created for themselves with bad decisions in the past.”

Given the roughly $2.8 trillion that Congress has spent on coronavirus relief for workers and employers, Mr. McConnell said, lawmakers must decide “whether there needs to be another tranche” of emergency aid. He said Congress needs to “clearly weigh” the impact of the amount of money lawmakers have already added to the national debt.

Some Republicans, such as Sen. Bill Cassidy of Louisiana, agree with Democrats that states need a bailout if the economy is to recover anytime soon.

“Clearly, we’re worried about the debt,” Mr. Cassidy said Wednesday on CNBC. “On the other hand, if we go into a depression, we’re going to really have debt. If we don’t have police departments and EMTs and fire departments and garbage pickup, none of that will matter. This is about helping cities which have totally lost their tax base because of COVID-19 to recover to provide those essential [services].”

Mr. Cassidy said he is advocating a plan that would award each state a base amount of aid, plus extra determined by a formula that takes into account a state’s population, its tax revenue loss and the level of harm to its economy from the pandemic.

“We will not grow if our cities cannot provide police, garbage and fire services for small businesses, which are the keystone of our economy,” he said. “And so this is another piece of what we do to restore our economy.”

The president, who is coming under fire from some black leaders over higher death rates among minorities, said he directed the White House Opportunity and Revitalization Council led by Housing and Urban Development Secretary Ben Carson to “focus its efforts on supporting under-served communities impacted by COVID.”

“I’m committed to restoring black and Hispanic communities to full economic health,” Mr. Trump said.