Will Coronavirus Force States into Bankruptcy?

WASHINGTON, DC — It’s a sensitive time for state and municipal governments as they lose billions of dollars in sales tax revenue due to the measures adopted to stop the spread of the novel coronavirus. That’s why Senate Majority Leader Mitch McConnell’s suggestion he was comfortable with states going bankrupt has been met with outrage.

“I would certainly be in favor of allowing states to use the bankruptcy route,” he told radio host Hugh Hewitt Wednesday.

Governors across the country are warning they will have to cut services and layoff essential workers if they don’t receive adequate support from the federal government in the next coronavirus relief bill.

But McConnell is not alone in his concern over the mounting national debt.

After passing nearly $500 billion in the interim relief bill, other Congressional Republicans have also signaled they have no appetite to continue federal spending.

State and local governments received $150 billion in the more than $2 trillion stimulus package signed into law by President Donald Trump last month.

“I hope that we don’t have to spend any more money. If we spend more money, we are going to have to start making some cuts. You cannot continue to print money like this Congress has done,” said Rep. James Comer (R) of Tompkinsville, Kentucky. 

“If these governors keep the states shut down, then Congress will keep being asked to spend more money and frankly I don’t know how much more Congress can spend,” he added.

“I told all of my local governments, my counties that I talk to, make sure you keep a good record of your COVID related expenses but not use it as just a reason to infuse cash to states,” said Rep. Brett Guthrie (R) of Bowling Green, Kentucky.

“Because we are going through this crisis now, it shouldn’t just be used as a bailout of states. Some taxpayer from another state shouldn’t be paying for the pension system in Kentucky. Nor should we be paying for the pension system in Illinois. Let’s look at expenses,” said Guthrie.

House Speaker Nancy Pelosi says the next relief bill must include funding for state and local governments but did not commit to an amount Friday. She criticized Republicans for being out of touch.

“They don’t believe in governance because they don’t really see the connection between the transit worker, the public health personnel, the police, fire, and all the rest,” said Pelosi.

According to the Center on Budget and Policy Priorities, based on historical patterns, the loss to states could total more than $500 billion.

“The deeply cynical suggestion that we let states go bankrupt is hardly an assault on blue states alone, as McConnell would have us believe. Make no mistake, this is an attack on Kentucky and Kentuckians by our own senior senator,” said Rep. John Yarmuth, (D) of Louisville, Kentucky.