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Economy & Business

Drained By Pandemic, States Are Asking For Federal Aid

MARY LOUISE KELLY, HOST:

Another 4.4 million Americans filed for unemployment benefits last week. That brings the total jobless claims to more than 25 million in just five weeks, and it is a big part of the reason states are struggling so much with their budgets. Governors and state lawmakers say they need help digging out from this historic loss of revenue. Colorado Public Radio's Bente Birkeland explains.

BENTE BIRKELAND, BYLINE: Before the coronavirus, states had experienced years of growth. Many had rainy day funds, and in Colorado, the financial picture looked great. The economy was booming, and the unemployment rate was only 2.5%. Then came COVID-19.

DANYE ESGAR: It has been an emotional rollercoaster, to be honest.

BIRKELAND: That's Democratic State Representative Daneya Esgar. She's the chair of the committee charged with crafting Colorado's budget. A few weeks ago the state had extra money to spend. Now when lawmakers return to the capital in May, Esgar says Colorado's budget could have up to a $3 billion shortfall.

ESGAR: Just trying to really figure out how do we cut this budget in the manner that we have to without harming anyone is really, I think, what's weighing hard on most of us right now.

BIRKELAND: The federal government can spend more than it brings in, but nearly every state requires a balanced budget. Since the start of the pandemic, personal income and sales taxes have plummeted. Top oil-producing states like Texas, Alaska and Wyoming have the added pressure of dealing with historically low oil prices, a big source of state funding. Shelby Kerns is the executive director of the National Association of State Budget Officers.

SHELBY KERNS: It hit very suddenly, and it's hitting all sources of state revenue. And we expect the impact to be severe.

BIRKELAND: In some ways, Kerns says, this situation is a lot tougher than the 2008 recession. She says many states have limited options for keeping up critical services in the midst of a public health emergency.

KERNS: I think there's a difference between things you can do and things that are wise to do. You don't want to react in ways to solve an economic or fiscal problem that then, you know, makes the public health crisis worse.

BIRKELAND: As revenues freefall, governors are preparing the public for the dire financial landscape.

(SOUNDBITE OF MONTAGE)

JB PRITZKER: Our total budgetary gap for FY '21 is 6.2 billion.

GRETCHEN WHITMER: So I am going to be taking a 10% pay cut, and I've asked my senior executive staff to take a 5% pay cut.

KEVIN STITT: We're talking about agency cuts. We're talking about - how do we protect agencies going forward? We're talking about how much of the money to spend out of savings.

BIRKELAND: Those are the voices of Illinois Gov. J.B. Pritzker, Michigan Gov. Gretchen Whitmer and Oklahoma Gov. Kevin Stitt. Because states cannot use the billions of dollars in the first federal aid package to backfill their budgets from lost taxes or other revenue, some governors are making the ask to Congress again.

(SOUNDBITE OF ARCHIVED RECORDING)

ANDREW CUOMO: I don't have the capacity as a governor - no governor does - to generate revenue in a positive way from an economy that's not operating.

BIRKELAND: That's New York Gov. Andrew Cuomo, a Democrat and the vice chair of the National Governors Association. He and the chair, Republican Gov. Larry Hogan of Maryland, recently asked for $500 billion in aid for states to spend how they see fit. But some Republicans on Capitol Hill, including Senate Majority Leader Mitch McConnell, say they don't have any desire for a bailout and would rather see states file for bankruptcy. For NPR News, I'm Bente Birkeland in Denver. Transcript provided by NPR, Copyright NPR.