The Biden administration and Congress are negotiating a federal coronavirus spending package, and while it has many worthy goals, one thing should be eliminated: bailing out state budgets.
If they pass the billions of dollars in bailout money for state governments, as a governor, I’d get the political benefit of spending that money. It’s never unpopular. The most politically expedient thing for me to do right now would be to keep my head down and my hand out.
I have serious concerns, however, about the attitude towards unlimited spending in Washington. I publicly expressed concerns about the previous round of state bailout funds. This time around, it seems even more gratuitous.
I’m currently the governor of Mississippi, but I also hold the Chartered Financial Analyst designation, and I spent the last eight years trying to make budgets balance in our legislature. First and foremost, I’m a numbers guy, and the numbers on this bailout just don’t work.
State governments should have been preparing for a crisis like this before it arrived, rather than spending recklessly. In Mississippi, that’s exactly what we did. We deliberately filled our rainy-day fund to its statutory capacity over my time leading the Mississippi Senate as lieutenant governor. I was attacked for being stingy and not spreading money around to popular programs. Ahead of my 2019 run for governor, those stances cost me politically.
Many of my friends and allies — not to mention my critics — lobbied me to spend on worthy causes. Who cares about a rainy-day fund when times are good? There are raises to give and projects to fund! But our discipline in Mississippi has made all the difference in the last 12 months. We’ve had to make some modest cutbacks due to COVID-19, but nothing like the doomsday scenarios portrayed in many other states.
The fact is, many of these states should have been doing more routine maintenance of their bloated budgets before the crisis came. We’re unafraid of budget cuts here because they happen from time to time.
When we have more revenue coming in, we sock some away and spend the rest. When we don’t, we cut back. That’s what every family and business in America does. But many state governments rely on debt to fund their wish lists on an ongoing basis, and they never see the consequences until it’s too late.
Plenty of states invested in their trust funds and unemployment accounts before the pandemic. It’s not like Mississippi is a unicorn (we’re in the top four, but who’s counting?). The states that decided not to protect their fiscal integrity made a policy decision as well. Now, Congress seems poised to use taxpayer dollars from every state to rescue these profligate states from the consequences once again. This is morally wrong.
It’s not just about budgets and fiscal responsibility. There is a very predictable result of shutting down a state’s economy for months on end, as many “blue” states did. It’s no surprise that there is less economic activity — and tax revenue generated by it — in those states. Indeed, that was their goal.
In Mississippi, our farms and factories never stopped operating. The parts we did slow down, we opened back up as quickly as possible.
The result? Mississippi’s revenue is in pretty great shape considering the global pandemic. Total revenue collections for January fiscal year 2021 were 30 percent above the revenue estimate. In 2020, we attracted 30 percent more capital investment than we saw in 2019. We’ve recovered 103 percent of the jobs we lost at the height of COVID-19’s negative economic effects. We encouraged people to be safe while preserving their rights to shop, dine, work, and live.
State governments that closed their economies and opened their checkbooks are suffering. I have empathy for those governors. We cannot allow the country to continue down the same path, however. What will be the result if we teach states that the only result of reckless spending is a federal bailout? And who will be there holding our federal debt when the federal government finds itself in the same situation?
If federal negotiators are looking to responsibly trim back this behemoth of a federal spending bill, they can look first to the bailout fund. There is no reason states that were unwilling to make unpopular decisions before the pandemic cannot make unpopular decisions now. The bill is due, and prudent states’ taxpayers don’t want to pay for bad choices they didn’t make.