Budget & Tax, Economy

Oklahoma lawmakers oppose federal bailout of states

September 14, 2020

Ray Carter

Twenty-three Oklahoma state legislators have joined colleagues from across the country to oppose additional federal bailouts for state governments, signing a letter that declares bailouts will incentivize poor financial management and punish fiscally prudent states.

“The undersigned organizations, policy leaders, and elected officials believe the idea of the federal government ‘bailing out’ the states would be harmful to taxpayers, federalism, and ultimately the states themselves,” declares the letter, which was generated by the Save Our Country (SOC) coalition.

Oklahoma officials signing the letter included state Sens. Michael Bergstrom, R-Adair; Marty Quinn, R-Claremore; David Bullard, R-Durant; Lonnie Paxton, R-Tuttle; James Leewright, R-Bristow; Nathan Dahm, R-Broken Arrow; Gary Stanislawski, R-Tulsa; Chuck Hall, R-Perry; Mark Allen, R-Spiro; Paul Rosino, R-Oklahoma City; and Julie Daniels, Bartlesville; and state Reps. Marilyn Stark, R-Bethany; Mike Sanders, R-Kingfisher; Kevin West, R-Moore; Garry Mize, R-Guthrie; Chad Caldwell, R-Enid; Denise Crosswhite Hader, R-Piedmont; Mark Lepak, R-Claremore; Kevin McDugle, R-Broken Arrow; Jim Olsen, R-Roland; Nicole Miller, R-Edmond; Robert Manger, R-Oklahoma City; and Kenton Patzkowsky, R-Balko;

Gov. Kevin Stitt has also announced his opposition to additional federal bailout funding for state governments.

The joint letter notes that the federal government has already provided a general $150 billion COVID-19 relief fund, a $30 billion education-costs fund, and a $45 billion disaster-relief fund for state and local governments, and voices opposition to additional bailouts. Democratic leaders in Congress have been pushing for another round of federal bailout funding for state governments.

“We feel a federal bailout of state budgets would be counterproductive—rewarding states that have made poor financial decisions at the expense of those that have been fiscally responsible,” the letter said.

For example, the letter notes North Carolina lawmakers have built up that state’s rainy-day fund to $1.17 billion and accumulated a balance of $3.9 billion in the Unemployment Trust Fund. In contrast, Illinois’ rainy-day fund “would only keep the state running for about 15 minutes” and its state debt and unfunded liabilities have surpassed $486 billion ($38,000 per resident), an amount equal to 56 percent of the Illinois state’s GDP.

“While the economy has produced record revenues in recent years, sadly, states have also continued to accumulate massive amounts of debt and unfunded financial liabilities,” the letter states. “A federal bailout would only encourage this cycle of debt and spending to continue. It would also send the wrong message to states that have made difficult spending choices and practiced fiscal discipline.”

In a press conference conducted online Monday morning, officials with the Save Our Country coalition discussed why officials from across the nation are opposing additional federal bailout funding.

Stephen Moore, co-founder of the Committee to Unleash Prosperity, said states that have imposed the harshest shutdowns have wrecked their state economies but still have “by far, the highest death rates.”

“Basically, what happened in these states—these blue states and some red states that are requesting a massive federal bailout—is they want money for their bad decisions to destroy their economic infrastructure of their businesses and throwing millions and millions of their own workers out of their jobs for no health benefit whatsoever,” Moore said.

U.S. Sen. Rick Scott, R-Florida, previously served as governor of Florida for the eight years prior to his Senate election in 2018. Scott’s gubernatorial terms coincided with the early tenure of New York Gov. Andrew Cuomo, and Scott said a stark contrast in budget management has long been apparent.

“I watched my budget and he didn’t,” Scott said. “So now we have around 23 million people in Florida. His budget—with less than 23 million people—is almost double Florida’s. So he can’t live within his means.”

Missouri state Rep. Justin Hill, a Republican, noted Missouri and Illinois share a border.

“We are a direct recipient of the bad policies of the state of Illinois,” Hill said. “And the last thing I want to see for my constituents is a bailout of the state of Illinois, because literally the taxpayers over there are crossing the Mississippi River because of those policies.”

He said that if Congress provides “a bailout of these blue-state governors, we are just urging them to continue the bad policies.”

Other officials voiced similar concerns.

“To actually look at and try to say, ‘It doesn’t matter what you do, the federal government is going to bail you out,’ that actually incentivizes bad behavior,” said Utah Senate President Stuart Adams, a Republican.

“I think it would be a major mistake to pass any type of legislation that bails out bad-performing states relative to good-performing states,” said Dr. Arthur Laffer, chairman of the Save Our Country Coalition.

Officials also noted proposed state bailouts are heavily tilted toward only a handful of states.

Moore noted the bailout proposal advanced by the Democratic leadership of the U.S. House of Representatives would spend $4 trillion with roughly $1 trillion of that total directed to state government bailouts. Of that $1 trillion for states, about 40 percent, or $400 billion, comes from eliminating the cap on state and local tax deductions (SALT) on federal tax returns.

The SALT cap was part of the tax-reform measure signed into law by President Donald Trump in late 2017 that reduced tax loopholes in exchange for lowering overall tax rates. Those affected most by the cap are high-income earners in high-tax states. Although California and New York are home to less than 18 percent of the total United States population, Moore said residents of those states would receive 35 percent of the tax benefit from the Democratic plan.

He said those states could reduce the impact of the SALT cap without federal bailouts.

“The fact is taxes do matter,” Moore said, “and the solution for Illinois and New York and California is to cut their taxes, to make them more competitive.”