Don’t bail out state governments.
• Workers and small businesses need support: A survey by Main Street America “indicates that millions of small businesses will be at great risk of closing permanently if the crisis continues for several months. Of the nation’s approximately 30 million small businesses, nearly 7.5 million small businesses may be at risk of closing permanently over the coming five months, and 3.5 million are at risk of closure in the next two months.”
White House economic adviser Kevin Hassett recently warned that the unemployment rate may reach “Great Depression levels.” The five-week total for unemployment claims is at 26.4 million and the number of jobs lost during the period is greater than all of the job gains since the Great Recession.
Instead of bailing out state and local governments, the federal government should continue to support programs to keep workers on the payroll and to keep small businesses alive. While so many workers are experiencing layoffs, closures, furloughs or pay cuts, many state and local governments have yet to make meaningful reductions — even in “non-essential” areas.
• Real reforms needed: Illinois is the poster child of the need for reform. The problems in the Land of Lincoln started long before the current crisis. The state has a chronic backlog of unpaid bills, the worst-funded state pension system, an ongoing budget deficit, a weak rainy day fund, and a negative bond rating. Add in the mass exodus of people (and jobs) and you can see that Illinois was already in real trouble.
While more than 755,000 people filed for the unemployment in Illinois between March 1 and April 18, 2020, the current governor of Illinois is refusing to consider delaying $261 million in automatic raises to state workers scheduled for this coming July.
When I took office in January 2011, the State of Wisconsin had a budget gap of $3.6 billion, the rainy day fund was almost gone and my predecessors had raided the transportation fund and the patient compensation fund. We took immediate action and proposed big, bold reforms to permanently fix the problems we inherited. The left went wild.
Within hours, protesters surrounded the location I was visiting. Days later, the state Capitol was occupied by protesters.
Thankfully, our common sense conservative reforms worked. Our state had a budget surplus all eight years I was in office. The rainy day fund was 190 times larger when I left than it was when we took office. We paid back the funds that were raided by my predecessors. And our pension system is fully funded — No. 1 in the country.
• Temporary federal funds create bigger holes: A major portion of the $3.6 billion budget gap we faced when I took office came from federal stimulus funding that went away. The same happened with the gap in budgets for many school districts and local governments.
Stimulus funding from the federal government had artificially kept local and state government budgets going, but when the money dried up the holes were big and the cuts were painful. In 2010 (the year before I took office as governor), the Milwaukee Public Schools system experienced a drop in aid and had to lay off staff.
One of the first to receive a pink slip was a teacher named Megan Sampson, who had been named the outstanding new teacher of the year by the association of English teachers in Wisconsin. Under the old system, however, the last hired were the first fired and that included Ms. Sampson.
A year later, we changed the process with our reforms. Seniority and tenure are now gone. School districts (state and local governments, too) can now staff based on merit and pay based on performance. That means they can put the best and the brightest in the classroom and keep them there.
Without our reforms, the cuts required to fill the funding holes were devastating a decade ago. We know from experience that bailing out state and local governments with temporary funds will only create bigger holes to fill in the future. Now is the time to enact real reforms that will put our states and local governments on sound financial standing.
• The federal government doesn’t have the money: The U.S. debt is now over $24 trillion. With all of the money spent on the crisis, it will be over $30 trillion by the end of the year. By then, the federal government will be borrowing money just to pay off interest on the debt. If anything, politicians in Washington need an intervention to get the debt crisis under control.
The federal government can’t afford to bail out state governments. Instead, focus on helping our workers and small businesses. And focus on forcing state and local governments to enact real and lasting reforms.
• Scott Walker was the 45th governor of Wisconsin. You can contact him at firstname.lastname@example.org or follow him @ScottWalker.
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