States plan for cuts as Congress deadlocks on more virus aid

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Photo credit FILE - In this May 14, 2020, file photo, California Gov. Gavin Newsom discusses his revised 2020-2021 state budget during a news conference in Sacramento, Calif. Spending cuts are compounding for schools and state programs, reserve funds are dwindling, and some governors have begun proposing new taxes and fees to shore up state finances shaken by the coronavirus pandemic. With Congress deadlocked over a new coronavirus relief package, many states haven't had the luxury of waiting to see whether more federal money will come their way. (AP Photo/Rich Pedroncelli, Pool)

Spending cuts to schools, childhood vaccinations and job-training programs. New taxes on millionaires, cigarettes and legalized marijuana. Borrowing, drawing from rainy day funds and reducing government workers' pay..

These are some actions states are considering to shore up their finances amid a sharp drop in tax revenue caused by the economic fallout from the COVID-19 pandemic.

With Congress deadlocked for months on a new coronavirus relief package, many states haven't had the luxury of waiting to see whether more money is on the way. Some that have delayed budget decisions are growing frustrated by the uncertainty.

As the U.S. Senate returns to session next week, some governors and state lawmakers are again urging action on proposals that could provide hundreds of billions of additional dollars to states and local governments.

“There is a lot at stake in the next federal stimulus package and, if it’s done wrong, I think it could be catastrophic for California,” said Assemblyman Phil Ting, a Democrat from San Francisco and chairman of the Assembly Budget Committee.

The budget that Democratic Gov. Gavin Newsom signed in June includes $11.1 billion in automatic spending cuts and deferrals that will kick in Oct. 15, unless Congress sends the state $14 billion in additional aid. California's public schools, colleges, universities and state workers' salaries all stand to be hit.

In Michigan, schools are grappling with uncertainty as they begin classes because the state lacks a budget for the fiscal year that starts Oct. 1.

Ryan McLeod, superintendent of the Eastpointe school district near Detroit, said it is trying to reopen with in-person instruction, “but the costs are tremendous" to provide a safe environment for students.

“The only answer, really, is to have federal assistance,” McLeod said.

Congress approved $150 billion for states and local governments in March. That money was targeted to cover coronavirus-related costs, not to offset declining revenue resulting from the recession.

Some state officials, such as Republican Gov. Eric Holcomb of Indiana, are pushing for greater flexibility in spending the money they already received. Others, such as Republican Gov. Mike DeWine of Ohio, say more federal aid is needed, especially to help small businesses and emergency responders working for municipalities with strained budgets.

In mid-May, the Democratic-led U.S. House voted to provide nearly $1 trillion of additional aid to states and local governments as part of a broad relief bill. But the legislation has stalled amid disagreements among President Donald Trump's administration, Republican Senate leaders and Democrats over the size, scope and necessity of another relief package. In general, Republicans want a smaller, less costly version.

The prospects for a pre-election COVID-19 relief measure appear to be dimming, with aid to states and local governments one of the key areas of conflict.

The bipartisan National Governors Association and Moody's Analytics have cited a need for about $500 billion in additional aid to states and local governments to avoid major damage to the economy. At least three-quarters of states have lowered their 2021 revenue projections, according to the National Conference of State Legislatures.

While Congress has been at loggerheads, many states have pressed forward with budget cuts.