Failed states

Every state and municipal government is teetering on the brink of fiscal calamity right now. This is, to say the least, not an ideal circumstance to face in the midst of a public health crisis. It's also a direct result of the health crisis, of course, and should be treated as such. So far, unfortunately,  the response to this symptom is no better than any other aspect of the disastrous federal response to COVID 19.

The Republican initiated CARES Act passed in Congress last week provides massive unaccountable bailouts to large banks and corporations. It presents small businesses with a morass of SBA technicalities to tangle with. And it gives workers little more than pocket change.  There is money in there designated for the states as well. But it's already obvious that will hardly be enough to meet the costs they'll incur fighting the disease and doesn't even begin to address the crippling budget shortfalls to follow.

This much is clear already. And that's before most states even understand the strings attached to the funds they've been granted. Louisiana will receive $1.8 billion from the CARES Act. But legislators aren't yet sure how they'll be allowed to spend it.

What Louisiana budget drafters are trying to figure out is if the money coming from Washington, D.C., could displace some of the dollars the state already had slotted, thereby freeing money to use elsewhere in the state budget.

The general understanding is that federal money can be used to pay COVID-19 expenses — and not to replace state revenue losses.

Now that the legislative session has already been postponed, there's even less time to sort this out.   Louisiana faces so much uncertainty because its budget depends heavily on oil and gas production and on sales taxes. With suddenly oil down at pre-2003 prices tourism at a standstill, and consumer activity limited to bare necessity shopping, the whole of state govenrment looks like it's about to crash. 

But the one thing lawmakers should not do is panic. They may be faced with a crisis within a crisis, but they should know also so is every state. A global pandemic is threatening to cost the US hundreds of thousands of lives, potentially.  50 failed states cannot cope with the ramifications of that. And so the states cannot be allowed to fail. Louisiana legislators should assume they won't be. If the uncertainty persists over the summer, they can pass a standstill budget and muddle though to next year.

Either way Congress will have to act again. We don't know when that will be but when they do there are already plans for what that action can look like.  And shoring up state and municipal budgets will have to be a top priority.