President Trump on Monday questioned why the federal government should provide financial relief to states facing budgetary strains due to the coronavirus pandemic, portraying it as a partisan issue in states with Democratic governors.
It’s a signal Trump may be turning away from supporting funding for cash-strapped states in a new coronavirus relief bill, though the president has sent conflicting signals on the issue already.
“Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help?” Trump tweeted. “I am open to discussing anything, but just asking?”
Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help? I am open to discussing anything, but just asking?
– Donald J. Trump (@realDonaldTrump) April 27, 2020
Trump tweeted last week that he hoped future coronavirus legislation would include “fiscal relief to State/Local governments for lost revenues from COVID 19.”
But after Senate Majority Leader Mitch McConnell (R-Ky.) floated the idea of allowing states to go bankrupt rather than sending federal money to them, Trump said his administration was looking into the idea.
“I’ve been talking to a lot of the different senators, but I don’t want to talk about it now,” Trump said Thursday. “That was a very interesting presentation.”
Governors in both parties have panned McConnell’s comments.
New York Gov. Andrew Cuomo (D) called it a “really dumb idea.”
“The suggestion was made, states should declare bankruptcy . …You want to send a signal to the markets that this nation is in real trouble? You want to send an international message that the economy is in turmoil? Do that,” Cuomo said.
“The last thing we need in the middle of an economic crisis is to have states filing bankruptcy all across America and not able to provide services to people who desperately need them,” Maryland Gov. Larry Hogan (R) said.
There’s no indication that McConnell is preparing legislation that would allow states to declare bankruptcy.
Several states are facing major budget shortfalls as businesses and other sources of revenue have been forced to close to try and slow the spread of the coronavirus.
It’s unclear whether states could even declare bankruptcy legally, and experts have said doing so may not even help them through the pandemic-related budget issues.
The U.S. bankruptcy code does not include provisions that allow states to declare bankruptcy. Local governments have the ability to file for bankruptcy under Chapter 9 of the code, but only if their state authorizes them to do so.