The federal government has helped already, with $150 billion in the Cares Act to help pay for unbudgeted expenses attributable to the pandemic. The Federal Reserve has offered to purchase some short-term municipal debt. Next, Congress must come through with a new installment of unrestricted cash relief to spare state and local governments from massive and economically counterproductive cutbacks. Democrats and Republicans on the Hill seem supportive, as does President Trump. A partisan dispute has surfaced in the past few days, however, starting when the Illinois Senate president, a Democrat, asked for $10 billion in federal aid to his state’s badly managed public employee pension system, which has unfunded liabilities of $138 billion. Predictably, this triggered GOP lawmakers, including Senate Majority Leader Mitch McConnell (Ky.), who churlishly spoke of governors trying to get “free money” and mused about passing a new law to let distressed states go through bankruptcy, as Puerto Rico and Detroit have done.

Maybe some facts will help. The most important of these is that, by and large, state governments entered 2020 in relatively good financial condition, thanks to what was a booming economy — and to their own fiscal responsibility. All 50 states have set aside money in at least one rainy-day fund, with a combined balance of roughly $62 billion as of the end of 2019, according to the Congressional Research Service. The median balance in these funds was 7.3 percent of general fund spending, according to the National Association of State Budget Officers. States can and should draw on these dollars, but even if they tapped them all, there would still be a huge budget hole to fill. Illinois’s worst-in-the-nation pension shortfall is indeed a self-inflicted structural failing (and Kentucky’s is almost as bad) that federal taxpayers cannot be expected to remedy. It is also not representative of the broader predicament of the states, which is overwhelmingly due not to mismanagement but to an unforeseen shock from this global pandemic.

There is no issue of “moral hazard” — rewarding bad behavior — when it comes to providing federal aid to state and local governments, just as there was no such issue in coming up with aid to the private sector. Mr. McConnell says he thinks “this whole business of additional assistance for state and local governments need[s] to be thoroughly evaluated.” By all means, evaluate it: Objective analysis will show that state and local governments need and deserve more emergency support from Washington.

AD

AD