[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
THE NEED FOR FINANCIAL AID TO
AMERICA'S STATES AND TERRITORIES
DURING THE PANDEMIC: SUPPORTING
FIRST RESPONDERS, ASSISTING SCHOOLS
IN THEIR EFFORTS TO SAFELY EDUCATE,
AND PREVENTING MASS LAYOFFS
=======================================================================
VIRTUAL HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
__________
SEPTEMBER 10, 2020
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-108
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
______
U.S. GOVERNMENT PUBLISHING OFFICE
43-501 PDF WASHINGTON : 2021
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California ANN WAGNER, Missouri
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri STEVE STIVERS, Ohio
ED PERLMUTTER, Colorado ANDY BARR, Kentucky
JIM A. HIMES, Connecticut SCOTT TIPTON, Colorado
BILL FOSTER, Illinois ROGER WILLIAMS, Texas
JOYCE BEATTY, Ohio FRENCH HILL, Arkansas
DENNY HECK, Washington TOM EMMER, Minnesota
JUAN VARGAS, California LEE M. ZELDIN, New York
JOSH GOTTHEIMER, New Jersey BARRY LOUDERMILK, Georgia
VICENTE GONZALEZ, Texas ALEXANDER X. MOONEY, West Virginia
AL LAWSON, Florida WARREN DAVIDSON, Ohio
MICHAEL SAN NICOLAS, Guam TED BUDD, North Carolina
RASHIDA TLAIB, Michigan DAVID KUSTOFF, Tennessee
KATIE PORTER, California TREY HOLLINGSWORTH, Indiana
CINDY AXNE, Iowa ANTHONY GONZALEZ, Ohio
SEAN CASTEN, Illinois JOHN ROSE, Tennessee
AYANNA PRESSLEY, Massachusetts BRYAN STEIL, Wisconsin
BEN McADAMS, Utah LANCE GOODEN, Texas
ALEXANDRIA OCASIO-CORTEZ, New York DENVER RIGGLEMAN, Virginia
JENNIFER WEXTON, Virginia WILLIAM TIMMONS, South Carolina
STEPHEN F. LYNCH, Massachusetts VAN TAYLOR, Texas
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
Charla Ouertatani, Staff Director
C O N T E N T S
----------
Page
Hearing held on:
September 10, 2020........................................... 1
Appendix:
September 10, 2020........................................... 75
WITNESSES
Thursday, September 10, 2020
Grisham, Hon. Michelle Lujan, Governor, State of New Mexico...... 9
Guerrero, Hon. Lourdes Leon, Governor, Territory of Guam......... 7
Holtz-Eakin, Douglas, President, American Action Forum........... 12
Kelly, Hon. Laura, Governor, State of Kansas..................... 6
Walz, Hon. Timothy J., Governor, State of Minnesota.............. 10
APPENDIX
Prepared statements:
Grisham, Hon. Michelle Lujan................................. 76
Guerrero, Hon. Lourdes Leon.................................. 79
Holtz-Eakin, Douglas......................................... 83
Kelly, Hon. Laura............................................ 91
Walz, Hon. Timothy J......................................... 96
Additional Material Submitted for the Record
Waters, Hon. Maxine:
Written statement of the American Federation of State, County
and Municipal Employees (AFSCME)........................... 99
Letter from Andrew M. Cuomo, Governor of New York, to the New
York State Congressional Delegation, dated July 29, 2020... 103
Cleaver, Hon. Emanuel:
Letter from David Ralston, Speaker of the Georgia House of
Representatives, to United States Senator David Perdue..... 105
Letter from David Ralston, Speaker of the Georgia House of
Representatives, to United States Senator Kelly Loeffler... 107
Written statement of the United States Conference of Mayors.. 109
Davidson, Hon. Warren:
Letter from Mike DeWine, Governor of Ohio, to the Ohio
Congressional Delegation................................... 111
Resolution No. 2020-79, City Council, Mt. Vernon, Ohio....... 113
Written statement of the Ohio Municipal League (OML)......... 115
Written statement of the Ohio Township Association (OTA)..... 116
Resolution No. R-18-20....................................... 117
Resolution No. R2020-23...................................... 121
Resolution No. 2507-20....................................... 123
Resolution No. 6089.......................................... 124
Green, Hon. Al:
Press release of the National Governors Association (NGA).... 126
Hill, Hon. French:
``Comparison of Sales Tax Revenue Versus Covid Cases''....... 127
Written responses to questions for the record from Governor
Grisham.................................................... 128
Written responses to questions for the record from Governor
Walz....................................................... 129
Loudermilk, Hon. Barry:
Press release from Georgia Governor Brian P. Kemp, Office of
the Governor, entitled, ``Kemp: August Net Tax Revenues Up
7.7%''..................................................... 130
McHenry, Hon. Patrick:
Written statement of the National Taxpayers Union (NTU)...... 132
``Government vs. Private Covid Layoffs''..................... 135
Phillips, Hon. Dean:
Written statement of Minnesota Management and Budget......... 138
Wagner, Hon. Ann:
Letter to County Executive Sam Page.......................... 154
THE NEED FOR FINANCIAL AID
TO AMERICA'S STATES AND
TERRITORIES DURING THE
PANDEMIC: SUPPORTING FIRST
RESPONDERS, ASSISTING
SCHOOLS IN THEIR EFFORTS
TO SAFELY EDUCATE, AND
PREVENTING MASS LAYOFFS
----------
Thursday, September 10, 2020
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 12:08 p.m., via
Webex, Hon. Maxine Waters [chairwoman of the committee]
presiding.
Members present: Representatives Waters, Maloney,
Velazquez, Sherman, Meeks, Scott, Green, Cleaver, Himes,
Foster, Beatty, Heck, Vargas, Gottheimer, Lawson, San Nicolas,
Tlaib, Porter, Axne, Casten, Pressley, Wexton, Adams, Dean,
Garcia of Illinois, Garcia of Texas, Phillips; McHenry, Wagner,
Posey, Luetkemeyer, Huizenga, Stivers, Barr, Tipton, Hill,
Emmer, Zeldin, Loudermilk, Davidson, Budd, Kustoff, Gonzalez of
Ohio, Steil, and Taylor.
Chairwoman Waters. The Financial Services Committee will
come to order. Without objection, the Chair is authorized to
declare a recess of the committee at any time.
Before we begin today's hearing, I want to remind Members
of a few matters, including some required by the regulations
accompanying House Resolution 965, which established the
framework for remote committee proceedings.
First, I would ask all Members on the Webex platform to
keep themselves muted when they are not being recognized by the
Chair. This will minimize disturbances while Members are asking
questions of our witnesses. Members on the Webex platform are
responsible for muting and unmuting themselves, and the staff
has been instructed not to mute Members except when a Member is
not being recognized by the Chair, and there is inadvertent
background noise.
Members on the Webex platform are reminded that they may
only attend one remote hearing at a time, so if you are
participating today, please remain with us during the hearing.
Members should try to avoid coming in and out of the hearing,
particularly during the question period.
If, during the hearing, Members wish to be recognized, the
Chair recommends that Members identify themselves by name so as
to facilitate the Chair's recognition. I would also ask the
Members to be patient as the Chair proceeds, given the nature
of the online platform the committee is using.
Today's hearing is entitled, ``The Need for Financial Aid
to America's States and Territories During the Pandemic:
Supporting First Responders, Assisting Schools in Their Efforts
to Safely Educate, and Preventing Mass Layoffs.''
I now recognize myself for 4 minutes to give an opening
statement.
The coronavirus pandemic crisis continues to cause terrible
harm across the nation. Over 189,000 people have lost their
lives to the virus in the United States, and there have been
over 6.3 million cases nationwide. Last week's jobs numbers
showed an unemployment rate still over 10 percent for Black,
Hispanic, and Asian workers, and millions of families are in
danger of being evicted from their homes as they struggle just
to make ends meet.
Today, we will be discussing the urgent need for Congress
to provide financial relief to the nation's States and
Territories during this crisis.
It would have been interesting to hear the perspectives of
Republican Governors at today's hearing. Unfortunately, the
Minority opted not to invite any. Nevertheless, I look forward
to hearing from Governors Kelly, Grisham, Guerrero, and Walz.
As described in the committee's rules, this committee has
jurisdiction over financial aid of all sectors and elements
within the economy, which directly relates to the efforts by
States and Territories to navigate this pandemic. After all,
State and Territory Governments are on the front lines of the
response to the crisis.
Many States have stepped up to support testing, purchase
personal protective equipment and other critical medical
supplies, and ensure a robust public health response to the
crisis. States' and Territories' Governments are also working
to tackle the challenge of remote learning for students who
cannot safely return to the classroom.
According to the National Conference of State Legislatures,
State Houses have approved over $3.5 billion in unanticipated
expenditures to combat the virus. States and Territories are
experiencing State declines in State tax revenue. One estimate
based off of Congressional Budget Office projections shows that
the total budget shortfall of State and local governments next
year will near $1 trillion.
Of course, we learned during the Great Recession that
budget cuts are not the solution to these shortfalls. In fact,
cuts in State spending exacerbated and lengthened the last
recession. As a result of this crisis, States and Territories
need additional financial support for our first responders to
assist schools and prevent layoffs.
While Congress passed $150 billion in State aid in the
bipartisan Coronavirus Aid, Relief, and Economic Security
(CARES) Act, the National Governors Association, which
represents Republican and Democratic Governors alike, quickly
called on Congress for much more help, recognizing the urgent
need to provide additional COVID-19 relief.
House Democrats passed the Health and Economic Recovery
Omnibus Emergency Solutions (HEROES) Act on May 15th, which was
118 days ago. Among other things, the legislation would provide
$915 billion to State, local, Territorial, and Tribal
Governments to create emergency rental assistance and homeowner
assistance funds, provide a second round of economic stimulus
payments to most families, and extend unemployment benefits
until January 2021. The HEROES Act would provide significantly
more funding to cities and counties and also would clarify
Treasury Department guidance that currently prevents State
Governments from using relief funds to avoid layoffs and
harmful acts.
However, Mitch McConnell and Senate Republicans have
blocked this critical relief, and their alternative bill
provides zero dollars to States, zero dollars for rental
assistance, and, to add insult to injury, claws back hundreds
of billions of dollars that could be used to support struggling
businesses.
In addition, the President himself has made reckless and
inflammatory threats to cut off funding to the States because
he does not like the protests against racism and police
brutality occurring in the streets of many communities. They
must stop playing games while families across the country
suffer, and pass the urgently-needed relief in the HEROES Act.
I look forward to hearing from our distinguished witnesses
about the challenges they are facing and the response that is
needed from the Federal Government during this national crisis.
Now, I will recognize the ranking member of the committee,
the gentleman from North Carolina, Mr. McHenry, for 4 minutes.
Mr. McHenry. I thank the chairwoman for yielding.
And, here we are again. We are having a hearing about a
bill the House passed 4 months ago that has no chance of
becoming a law. The committee is being used to prioritize
Democrat priorities that aren't going to become law. And if the
chairwoman wanted GOP Governors to attend, she could have given
us more than the one witness that is provided for. Our witness
today will be able to speak to the economic issues facing the
State Governments and the relative position that those State
Governments are in.
Look, this is also not in our committee's jurisdiction. If
you want to appropriate money to the States, there is an
Appropriations Committee. We are the Financial Services
Committee. Within our jurisdiction, you have much-needed
lending that is being given to States through the municipal
bond market in the Federal Reserve. That is lending, not
spending.
What I think we need is a reasonable compromise to support
workers and small businesses, and make sure that we can get
people back on their feet again, and make sure we have a better
healthcare response and testing regime so we can get our
economy open and kids in school again.
Back in the spring, Republicans and Democrats had a great
compromise in the Coronavirus Aid, Relief, and Economic
Recovery (CARES) Act. We have provided $2.6 trillion in relief
funds and approximately $1 trillion in direct and indirect
State aid and locality aid. That bipartisanship was also
reflected in this committee with an understanding that, for
hearings, there would be no more than four witnesses; we would
keep this brief so that Members could engage and have good
questions. But today, this is out of control because of how
many witnesses we have. But that is certainly the case. We are
getting close to November, and things have become far less
bipartisan, and much more, quite frankly, wacky around
Congress.
So, here we are. Democrats are using this hearing to claim
that States are struggling, but it certainly isn't due to a
lack of funding. In fact, of the $150 billion in direct aid
provided for by the CARES Act, the Congressional Research
Service found that as of June 30th, States had only used 25
percent of their distribution. Republicans believe that any
additional support should be based on data and directly related
to COVID. But to date, States have yet to identify how they are
using their money and where additional funding to address COVID
may be needed.
We should all agree that one of the best ways to support
State and local governments during this pandemic is through
strong State and locality economies and economies in those
communities. And the way to create stronger economies is by
supporting local businesses and the employees of those
businesses. Thriving small businesses generate revenue that
contributes to State and local tax bases. When people are
working, they can support their local and State Governments.
Unfortunately, Democrats' partisanship prevents small
businesses from accessing that support right now.
So, I want to begin and end where I think we should all
begin this hearing: as Federal Reserve Chairman Jay Powell said
back in June, ``A tight job market is probably the best single
thing that the Fed can do to support gains by all low- and
moderate-income communities, and particularly for minority
communities that are heavily representative of these groups.
Everything we are doing is to try to get the labor market back
to where it was in February.''
We should take that approach, and not waste Members' time
parading Democrat Governors in front of Congress to ask for
money. There are bigger issues at stake that we should be
focused on, in getting kids back in school, and our economy
reopened again.
And with that, I yield back.
Chairwoman Waters. Thank you very much.
I would like the Members to feel very comfortable that this
hearing today is certainly in our jurisdiction because we chose
to do it.
I now recognize the gentleman from Missouri, Mr. Cleaver,
who is also the Chair of our Subcommittee on National Security,
International Development and Monetary Policy.
Mr. Cleaver. Thank you, Madam Chairwoman. Let me begin by
just welcoming my next-door neighbor, Governor Laura Kelly.
And, Madam Chairwoman, I am in Kansas City, where I served
two terms as mayor, and I know the City and its systems quite
well. I can say with absolute certainty that Kansas City, like
many other cities, is experiencing unprecedented stress during
this pandemic. And every municipality and county in the nation
is being financially slapped around from dwindling revenues and
exploding expenditures.
Now, don't take my word for it. I am a progressive
Democrat, and I am a Methodist. But the conservative American
Enterprise Institute (AEI) on Tuesday released a report saying
that, ``While revenues have declined for the first time since
the Great Depression, the worst is still to come.''
There have been a lot of discussions in recent months about
defunding the police, which, of course, I oppose. But if we
don't get this bill funded, we will be defunding the police and
the fire departments around the country.
Thank you.
Chairwoman Waters. Thank you.
I now recognize the gentleman from Minnesota, Mr. Emmer,
for 1 minute.
Mr. Emmer. Thank you, Madam Chairwoman.
As the ranking member mentioned, the bipartisan work of the
CARES Act provided trillions in immediate and long-term
assistance to first responders, educators, and small business
owners. It is because of Congress and this Administration's
quick actions that our economy has begun to regain its footing.
Efforts by the Majority to use these individuals today as pawns
to justify billions in new spending for State Governments is
uncalled for, especially if States like mine have yet to use
hundreds of millions in relief money given to them.
Governor Walz, we served together. Although we have had our
disagreements, we have worked on several occasions to help
Minnesotans. Since you have chosen to appear before this
committee on the eve of another extension of your emergency
authority, I look forward to learning how you intend to
empower, not penalize, business owners, school administrators,
and families with the information they need to drive our
economic comeback instead of digging our children and
grandchildren deeper into debt.
Thank you. I look forward to everyone's testimony today.
Chairwoman Waters. Thank you very much.
I want to welcome our distinguished panel of witnesses.
First, the Honorable Laura Kelly, Governor of Kansas. She
was elected to the Kansas Senate in 2004, serving as ranking
member of the Ways and Means Committee from 2007 and throughout
the Great Recession, until her election as Governor. Welcome.
Second, the Honorable Lourdes Leon Guerrero, Governor of
Guam. After a career in the health sector, she served for 10
years in the Guam legislature. She held the post of CEO,
president, and chairwoman of the board of the Bank of Guam. I
must note that Governor Guerrero contracted COVID-19 last
month. Governor, it is so good to see you in recovery. Thank
you for being here.
Third, the Honorable Michelle Lujan Grisham, Governor of
New Mexico. She previously represented New Mexico right here in
the U.S. House of Representatives, and served as cabinet
secretary of New Mexico's Department of Health and its
Department of Aging and Long-Term Services. It's good to see
you.
Fourth, the Honorable Timothy J. Walz, the Governor of
Minnesota. He is a 24-year veteran of the Minnesota National
Guard, and a former high school teacher, and the coach of a
State football champion. He also represented Minnesota in this
House for over 10 years.
And finally, Dr. Douglas Holtz-Eakin, who served as
Director of the Congressional Budget Office from 2003 to 2009.
Dr. Holtz-Eakin served in the George H.W. Bush Administration
and in various academic positions in the field of economics.
Each of you will have 5 minutes to summarize your
testimony. The timer will go off at the end of your time, and I
would ask you to wrap up your testimony, so we can be
respectful of the other witnesses' and the committee members'
time. And without objection, your written statements will be
made a part of the record.
Governor Kelly, you are now recognized for 5 minutes to
present your oral testimony.
STATEMENT OF THE HONORABLE LAURA KELLY, GOVERNOR, STATE OF
KANSAS
Governor Kelly. Chairwoman Waters, Ranking Member McHenry,
and members of the committee, I am Laura Kelly, Governor of
Kansas. Thank you for the invitation to testify on behalf of my
State regarding our need for Federal aid as we overcome the
unprecedented challenges brought forth by COVID-19.
We have seen record numbers of weekly unemployment claims,
which overwhelmed our Department of Labor's antiquated computer
system. At times, we have struggled to access personal
protective equipment for our healthcare workers and adequately
test our population for COVID-19. Our small businesses have
suffered, many have been unable to make up for lost revenue or
were forced to furlough employees or even shut their doors
completely. Through all of these challenges, my administration
has worked to keep Kansas families safe and healthy.
I would also like to thank Congresswoman Sharice Davids for
being a strong advocate for Kansas small businesses during the
pandemic, introducing legislation requiring transparency around
relief funds to make sure they are getting to small Kansas
businesses.
However, we will need significantly more support from our
Federal partners to protect our institutions from drastic and
damaging cuts. Kansas is uniquely suited to address a looming
budget crisis during these unprecedented times because we have
already overcome one this decade, albeit self-inflicted rather
than an act of God.
In 2012, my predecessor, Governor Sam Brownback, signed
into law one of the most draconian tax cuts in our State's
history. The consequences were profound. As a 14-year member of
the State senate, I watched in dismay as other States recovered
and grew in the wake of the 2008 recession while Kansas instead
moved backward. State revenues plummeted by $900 million,
school funding was drastically cut, infrastructure spending was
decimated, and critical programs like Medicaid and temporary
assistance for needy families and foster care were gutted.
Kansas' bond rating was downgraded twice. Our agencies were
hollowed out. Our State highway and healthcare funds were
robbed. There are so many more examples, but the bottom line is
that years of austerity hurt our business owners, our farmers,
our children, our teachers, our essential workers, and our
families.
Before the pandemic, my administration's budget was crafted
to get Kansas back on sound financial footing, a process we
expected would take years of responsible governance. We have
prioritized rebuilding our State's fiscal foundation. We have
reestablished economic development tools within our Department
of Commerce, critical to ensuring Kansas can compete on a
global scale. We passed and restored a 10-year transportation
plan and fully funded public education for the first time in
years.
Thankfully, in 2017, a bipartisan group of legislators came
together to undo the tax cuts implemented in 2012 and began the
uphill climb of closing the budget deficit.
Unfortunately, just as we were righting the ship, we were
hit with the worst public health pandemic in this century. This
pandemic is different, and the fix isn't as simple as just
tightening our belt buckle.
Our Federal partners must step in and help. I know
firsthand that cutting local and State Government funding will
hamstring the State's ability to fight the pandemic and leave
us more vulnerable to future crises. Severe budget cuts don't
create small government, they create failed government--
governments that can't provide the essential services and
investments this country was built upon: good schools; stable
infrastructure; a solid social safety net; and a robust
economy.
I had a front-row seat to the worst budget crisis in our
State's history, and I know it hit the most vulnerable among us
the hardest. We need continued investments at the local and
State level to allow for decisions that best respond to
individual community needs. We need support for strategic
investments to stop the spread of the virus, enhance the
State's ability to respond, protect our schools, and provide
needed economic assistance to small businesses.
We need the Federal Government to support States and
support Kansans who are struggling. We need a coherent, top-
down strategy that will reassure businesses and Americans that
our government has a plan to keep our economy stable until a
vaccine is available.
I thank you for the opportunity to speak with you this
morning. I look forward to questions.
[The prepared statement of Governor Kelly can be found on
page 91 of the appendix.]
Chairwoman Waters. Governor Guerrero, you are now
recognized for 5 minutes to present your oral testimony. Thank
you.
STATEMENT OF THE HONORABLE LOURDES LEON GUERRERO, GOVERNOR,
TERRITORY OF GUAM
Governor Guerrero. Thank you.
Chairwoman Waters, Ranking Member McHenry, Vice Chairman
San Nicolas, and members of this distinguished committee,
``Hafa Adai,'' and hello from the people of Guam. Thank you for
this virtual opportunity to appear before you.
Throughout Guam's history, the island's central value to
the defense of the nation has been a strategic position in the
Western Pacific. From Anderson Air Force Base, Guam, and Naval
Base Guam, respectively, America is able to project power or
humanitarian assistance at a moment's notice on a global scale.
Indeed, Guam's no stranger to the influx of global conflict
or the unity of purpose that must rise to meet it. Prior to the
pandemic, Guam's tourism industry was our economic cornerstone,
breaking visitor arrival records on a nearly monthly basis.
Eighty-eight percent of Guam's visitors came from South Korea
and Japan. That number is now zero.
Pre-COVID-19, Guam's unemployment barely rose to 4 percent.
Now, nearly half of all private sector employees qualify for
the Pandemic Unemployment Assistance and the Federal Pandemic
Unemployment Compensation Programs that this Congress has
established.
Madam Chairwoman, I thank you and your colleagues for
Guam's inclusion in these affirmation programs. Your actions
help people you may never meet and in ways you may never know.
Additionally, while we contained the spread of COVID-19
from March to June, our positive case numbers rose as our
economy reopened. To preserve life and contain that community
spread, I issued a second stay-at-home order that remains in
effect today. Now, government revenues, which rose enough in
Fiscal Year 2019 to cut our deficit in half, may see a 7.2
decline in Fiscal Year 2021.
This means dangerous cuts to Guam public health operations,
drastic cuts to public safety, and potentially severe cuts to
education. This story is being told in every State and
Territory throughout the country and is why bold congressional
action is required.
Congress took serious bipartisan steps forward early on in
the pandemic, but these are temporary economic backstops that
are already beginning to fade. We are good stewards of the aid
we have received. We have worked to follow all Federal guidance
in relation to Federal moneys. At every juncture, we have tried
to match earnestness with speed, trying to never sacrifice
integrity in the use of these funds.
Accordingly, we welcomed a review by Guam's Office of
Public Accountability, other independent reviewers, and our
Federal partners.
As you act in the weeks ahead, I ask that you treat your
fellow citizens residing in our nation's Territories with
continued fairness and that: one, we are included equitably in
every Federal relief package; two, this package contains direct
unemployment assistance to Guam and the Territories and removes
any costs shared during this recession caused by the pandemic;
three, direct aid to small businesses be a central component of
any relief package, along with rental and homeowners'
assistance; four, a program be created to provide grants to
assist jurisdictions whose economy relies primarily on tourism;
and five, States and Territories be allowed the flexibility to
use funds for budget shortfalls.
While these steps will help Guam, we also know that
existing problems require new policy solutions to enable us to
make real economic progress. This includes addressing Federal
coverage of the $60 million in annual Earned Income Tax Credit
payments that comes directly from Guam's coffers, and an H2-B
policy that recognizes Guam's civilian construction demands.
Finally, I am supportive of securing eligibility for Guam
to participate in the Municipal Liquidity Facility Program as a
safety net.
In April, I wrote to Federal Reserve Chairman Powell,
Treasury Secretary Mnuchin, and Delegate San Nicolas to request
Guam's inclusion in the Program. I am certainly pleased to hear
that this request is now being considered.
It has been said that in times of great conflict or
struggle, we cease being individual American States and
Territories, and now, we simply become the United States of
America.
Thank you, and ``Si Yu'us ma'ase'.''
[The prepared statement of Governor Guerrero can be found
on page 79 of the appendix.]
Chairwoman Waters. Thank you very much.
Governor, I would like you to know that the successes that
you have been able to realize were all because of your
Representative--I want you to know that your Congressional
Representative here, Michael San Nicolas, has done a fabulous
job in representing your Territory.
Thank you very much.
Next, we will hear from Governor Grisham. You are now
recognized for 5 minutes to present your oral testimony.
STATEMENT OF THE HONORABLE MICHELLE LUJAN GRISHAM, GOVERNOR,
STATE OF NEW MEXICO
Governor Grisham. Thank you.
Good morning, Honorable Chairwoman Waters--it's lovely to
see you again--Ranking Member McHenry, and, of course, the
other distinguished committee members. I thank you very much
for the opportunity and the time.
As you know, the pandemic has unleashed economic
devastation in States all across the country. The wave of
financial pain threatens to swamp States like New Mexico
despite our healthy fiscal posture prior to the arrival of
COVID-19.
We labored for years here to diversify our economy,
strengthen our overall financial position, and improve our
long-term budget outlook. But much of that progress was undone
in only a few short and brutal months, and we face a long,
difficult road back.
Indeed, New Mexico and other energy-producing States have
experienced not only pandemic-related budget shortfalls, but a
collapse in the global oil market. These dual economic crises
have created a revenue gap that threatens to swallow the
central services so many depend upon--everything from education
to small business support, child welfare to healthcare
services, and more.
The fiscal impact of the pandemic is threefold. We have
already spent more than $400 million on direct COVID-19 costs,
including the purchase of PPE and testing supplies, and those
costs continue to mount. We face indirect costs as State
agencies and businesses adapt to a COVID-positive world. These
costs for K-12 public schools alone total more than $520
million. And we face the exponential loss of revenue due to the
economic downturn, which compounds the other two.
These three expenses are tied together, and we cannot
emphasize one over another. And let me be clear, these are not
static data points. The pandemic is ongoing, the storm is
raging, and those winds of fiscal damage are not dying down.
In all, New Mexico faces a nearly 20 percent decline in
general fund revenues year over year. A $4 billion shortfall is
a line item in Washington, but in New Mexico, it is the
difference between healthy, well-fed families, and the
alternative for our current fiscal year and the next.
Even with a record level of State revenue prudently set
aside in reserves, the fiscal crisis threatens to touch New
Mexicans in every corner of our State, who rely on State
programs and local level programs powered by Federal funds, so
many of whom have already struggled to find and maintain work,
to provide for their children, and to stay safe from the virus.
States like mine that have taken tough and proactive
measures to blunt the spread of COVID-19 must be able to use
Federal assistance to replace and back their lost revenues or
else make drastic, difficult cuts to essential services. Our
effective life-saving response to the pandemic cannot be left
as a millstone around the necks of New Mexico workers,
families, local governments, and small business owners who have
already given and lost so much.
Small business revenue in our State is down 21 percent this
year. Many businesses have furloughed or laid off workers and,
of course, some have closed their doors for good. Our small
businesses skew smaller than the national average, meaning they
cannot take on more debt, and grants are much more effective
than loans.
My administration, in partnership with our State
legislature, has delivered more than $400 million for small
business support programs, sustaining hundreds of jobs, and
still there are businesses and workers needing more.
We were one of the first seven States in the U.S. to
operationalize every emergency unemployment funding stream made
available, and we have delivered more than $2 billion in
assistance. But this has depleted our trust fund, and we will
need help in sustaining these lifelines.
We all know, and I know, that tightening our belts in the
coming months and years is critical. And indeed, in so many
States, including New Mexico, we already have. But these cost-
cutting measures will not be enough to weather the storm. An
umbrella is not enough protection in a hurricane. And the
rubber will meet the road in homes all across States like mine
where families, children, and workers may be left without.
State and local governments need more funding and more
flexibility. Already this year, New Mexico has demonstrated how
expeditiously we would use and provide funding to those who
need it most, but we need to expand the toolbox and fill it and
refill it. The health and economic crisis battering New Mexico
and the United States requires an all-hands-on-deck, whole-of-
government approach.
[The prepared statement of Governor Grisham can be found on
page 76 of the appendix.]
Thank you very much, Governor Grisham. We appreciate your
presence here today so much.
Next, we will ask Governor Walz to please present. You will
be recognized for 5 minutes.
STATEMENT OF THE HONORABLE TIMOTHY J. WALZ, GOVERNOR, STATE OF
MINNESOTA
Governor Walz. Chairwoman Waters, Ranking Member McHenry,
distinguished members of this committee, thank you. I am Tim
Walz,the Governor of Minnesota, and for many of you, I am a
former colleague and current friend. I want to thank you for
the opportunity to speak with you about the critical needs and
update you on where our States are at.
I do want to acknowledge my Minnesota colleagues who are on
this committee: Representative Dean Phillips; and
Representative Tom Emmer. Whether it is Representative
Phillips' work on the Paycheck Protection Program Flexibility
Act or Representative Emmer's unique and innovative advocacy
around blockchain to mitigate the coronavirus, Minnesota is
lucky to have you serving on this committee.
And I want to address all of you, and Representative Emmer,
I am not here to ask or complain. I am here humbly and deeply
grateful for the work that the CARES Act did. It did make a
difference. It did have an impact. We are grateful to Congress
and the Administration for what it did. And I assure you,
Representative Emmer, like any good budget, 92 percent of our
CARES Act money is allocated and obligated, and we have to look
at an open-ended pandemic to deal with that. But please know,
we care. It made a difference.
That is why we are here asking humbly that you continue
this type of assistance that has made a difference, not just in
the safety and the health of my constituents and fellow
Minnesotans, but it has helped businesses get back on their
feet. And that is why we are asking, in a bipartisan way, from
the National Governors Association that, as you negotiate,
please keep States in mind.
In my State, I came to this job, like many of my
colleagues, 19 long months ago. At times, it feels like
yesterday. At times, it feels like a lifetime. And we work
together to invest in our State, in education, in jobs, in
housing. And we did it in a State with one of the few
bipartisan--or split legislatures, and we did it together.
And we were able to make that fiscal discipline work. We
were able to make sure that we came together to get things
done. For the first time in 40 years, the Governor did not
issue a veto.
So I know there's a lot of talk in Washington about poorly-
managed States wanting to balance their budget. Let me be very
clear, Minnesota's House has been in good order because of
bipartisan cooperation. After the volatile times of the 2000s,
we went from deficits to surpluses. You don't have to take my
word for it. The triple A bond rating we get from the rating
agencies tells us that Minnesota in February of 2020 was in
strong control over revenues and spending that leaves the State
well-positioned.
As recently as 2020, we had a $1.5 billion surplus. Then,
COVID-19 hit. Within a matter of months, States all across this
country saw their financial situations rapidly decline.
Literally, in weeks, we went from a $1.5 billion surplus to a
$2.3 billion deficit. Now, we are projected at over $4.7
billion over the biennium.
Minnesota entered this crisis in a strong manner, with an
unemployment rate as low as 2.9 percent, but in a matter of
weeks, we went to 7.7 percent. Minnesota entered this well. We
had a rainy day fund. We had one of the most fiscally prudent
reserve policies in the nation. We had a well-educated
workforce and a diverse economic base. And we receive less
Federal aid than all but seven other States.
This wasn't enough to insulate us from COVID-19. I am sure
I speak for my fellow Governors when I say that we appreciate
everything that you have done, but we are not through this. It
is not over.
The CARES Act funding went to helping our school districts
prepare. We have safe school operations, and many of our
schools are back with in-person learning. Some are in hybrid
and some, because of the nature of the pandemic, are in
distance learning. But our children are being served.
This morning, I went and delivered meals. The City of Saint
Paul, the Saint Paul Public Schools, I have delivered 8 million
meals, making sure no child goes hungry. That is because of the
work you did. That is because of the assistance you gave to the
States. That is what we are asking for. Until COVID-19 is over,
we are going to need to continue to have that.
We are at a critical juncture for us to continue our robust
testing program that makes sure that we can keep businesses up
and running. When we have an infection at a meat processing
plant, we can step in, test, isolate, and get folks back to
work to make sure that those good jobs continue and that the
food supply is there for the country.
I have to tell you, these are challenging times. This is
not pitted us against you, and we are certainly not
complaining. I want to thank the committee for taking this up.
This is truly an all-of-government, all-of-society approach,
and the help that you have given has saved lives. The help that
you have given has opened up schools. The help that you have
given has restarted businesses. The help that you have given
has given us hope for the future.
We are here today, and I think I would speak for the other
Governors when I say, we know this is coming to an end, and the
pandemic and the virus doesn't care about our timeline. So, we
are asking you to prioritize the help you have given, we are
asking you to continue to make smart investments, and we are
asking you to work with us to make sure States are able to
deliver those services.
I thank you, Chairwoman Waters, and Ranking Member McHenry,
and I am glad to answer any questions.
[The prepared statement of Governor Walz can be found on
page 96 of the appendix.]
Chairwoman Waters. Mr. Holtz-Eakin, you are now recognized
for 5 minutes.
STATEMENT OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION
FORUM
Mr. Holtz-Eakin. Thank you, Chairwoman Waters, Ranking
Member McHenry, and members of the committee. It is a privilege
to be here today.
Let me make three brief points, and I look forward to
answering your questions.
Number one is that this recession is different than
anything the United States has ever experienced. Century
recessions were income-driven events often triggered by
inventory buildups that led to layoffs and then reduced
household spending. In this recession, we saw no income
decline. Income remained strong even as the economy plummeted.
Twenty-first century recessions to date were largely driven
by the bursting of financial bubbles. Whether it was the
dot.com bubble or the credit bubble in 2007-2008 where the
financial distress spilled over to the Main Street economy and
ultimately dragged it down as well.
In this case, it is an entirely different origin. It was
the coronavirus itself which caused people to pull back on
their economic activity, leading to an extraordinary decline.
The speed and severity are hard to really capture.
In the second quarter, the economy contracted at an annual
rate of 31.7 percent. In real people terms, our economy got 9
percent smaller in 3 months. In the worst year of the Great
Depression, it got 12 percent smaller. We experienced nearly
that in 3 months in the spring of 2020. And the most visible
manifestation of this was 20 million people losing their jobs
in a single month, 10 times more than had ever happened in the
United States.
The composition of that decline is also very different.
This is a decline led by a really strong contraction in
household spending, and, in particular, household spending on
services. Americans stopped going out to restaurants. They
stopped flying, they stopped going to hotels, they stopped
doing anything that risked coming into contact with people who
might be carrying the virus.
And, in particular, when we look at the micro data of this
event, it is the spending by households in high-income ZIP
Codes which contracted the most, and those services were
typically provided by low-income Americans. So, we had a very
strong division in this recession where the spending went down
at the top end, but the job loss has been at the bottom end.
I do want to note for the record that the policy response
is also historic. The Federal Reserve response to enhance its
balance sheet by about $3 trillion in private liquidity on an
open-ended basis was extraordinarily successful in stabilizing
financial markets.
And I think Congress has been too little commended for the
speed with which it passed the CARES Act, the targeting of the
CARES Act on the real problems that face the economy, cash flow
in the household sector, cash flow in small businesses, cash
flow across the economy, and getting the scale right. The CARES
Act was about 10 percent of GDP, and the problem was about 10
percent of GDP. And so, I thank you for that response. I think
it was exactly right.
My second point is that there is no way States and
Territories remained immune from this kind of economic event.
We certainly know that they had the bulk of the public health
response and some of the costs that came with that. We know
that first responders, PPE, and healthcare professionals have
stretched their budgets.
But there has also been a significant response for those
States and Territories. The CARES Act had $150 billion for
them. And as a fraction of the total package, that is actually
larger than was provided in the Recovery Act, when we faced the
last recession. So Congress, again, I think has responded to a
real problem in a substantial way.
My third point is that because this is so different than
the past, using historical experiences as a guide to the
appropriate level of support to the States and localities is
probably going to be off-target. If you think about it, tax
bases for the State-local sector probably held up better in
this recession than what one might expect.
In the data, this is now a low-wage worker recession. If
you are a high-wage worker in America, you are probably already
back to work when the recession is over. So the taxation at the
State and local level which is larger than those individuals
will probably hold up.
Unlike any other recession, the stock market didn't go
down, it is up, and so it is going to maintain the levels of
capital income. We have seen a historic response by Congress.
Much of that will be taxable. PPE money will be taxable, UI
will be taxable. So, income taxes bases will probably hold up
pretty well. Sales taxes, with the big decline in household
spending, are probably at risk, but it has been concentrated in
services, and that is the least heavily taxed part of the sales
tax base. And housing markets are, frankly, quite strong. We
are seeing property taxes rising across the economy.
People tend to focus on the last recession in thinking
about what we should do now. I would urge you to look at the
actual data about what is going on right now and measure the
needs based on that, because I don't think the history is going
to be a very good guide for what we need going forward.
Thank you, Madam Chairwoman, and I look forward to
answering your questions.
[The prepared statement of Dr. Holtz-Eakin can be found on
page 83 of the appendix.]
Chairwoman Waters. Thank you, Dr. Holtz-Eakin, for your
testimony. We are very pleased that you are here today.
I will now recognize myself for 5 minutes for questions.
We are facing a growing eviction crisis in this country.
According to Apartment List, 34 percent of renters were unable
to pay their rent in full at the beginning of August. And
according to some experts, we could see up to 40 million
renters at risk of eviction by the end of the year.
Governor Walz, you have tried to take action to address
this problem at the State level. In July, you extended your
safe eviction moratorium. You also established the $100 million
rental assistance program, but that isn't going to be enough to
help all of the renters in need in your State. According to a
Census Bureau survey, over 547,000 Minnesotans either missed a
housing payment in July or did not know how they would pay
their rent or mortgage in August. In California, that covers
over 6 million.
Governor Walz, how many more Minnesotans could you protect
if Congress approved the HEROES Act's $100 billion in rental
assistance?
Governor Walz. Thank you for the question, Chairwoman. ``A
lot'' is the answer, and I am grateful. I am grateful that the
Administration made a move on an eviction moratorium, but if it
doesn't come with the assistance, it just pushes the problem
down the road. And I think you have seen many economists
picture that. I think Dr. Holtz-Eakin is right that the housing
markets have remained relatively strong. That has also kept
rents up and mortgages and it's why interest rates are good.
There are folks at the upper end able to do that.
We were able to move $100 million, which makes a
difference. And just to be very clear, that is with the support
of landlords and business owners. And it goes right to them; it
keeps them in order. Again, coming on the heels of the
expiration of the $600 extra in the UI, we are grateful for the
$300 that we are able to use.
But I think the Chairwoman is hinting at exactly what we
are asking for, and I want to be very clear, I am not critical
of anything that you have been able to do to try and help us,
and I think folks on your main know better where we could have
adjusted it. I agree with you on the Recovery Act.
The only thing is, Dr. Holtz-Eakin, I was a Member of
Congress at that time. That allowed us to replace lost revenues
immediately. And so, that kind of impacted State budgets a
little differently. But this housing issue is going to come--it
was a top priority before COVID-19, housing was a crisis, and
it has been exacerbated by COVID-19. This is one of those
issues that I do think--and, again, I would be interested to
hear our witnesses talk about this--I do think this has the
potential to bring a drag-on if it brings the housing market
into this. And I think the help we get and the assistance on
the front end can maybe proactively stop that.
But, Chairwoman, the answer to your question is we are
very, very worried about what is going to happen come January
1st.
Chairwoman Waters. I am also worried, not only about the
renters, but about the landlords. Landlords are struggling to
pay mortgages and other costs that are associated with property
maintenance.
According to the Urban Institute, Black and Latinx
landlords are disproportionately struggling to pay their
mortgages, but are more likely to offer their tenants rent
repayment plans.
Governor Walz, what are you hearing from landlords in your
State, particularly the small mom-and-pop landlords?
Governor Walz. First of all, these are people really trying
to make it work. They are going out of their way. This idea
that they don't care or they are heartless, that is a myth.
They are doing their best to keep people in their homes.
I do think that the chairwoman has hit on something that we
are really grappling with and, obviously, we have been in the
news for grappling with inequities and in racial issues. It
extends into homeownership, it extends into rent, and it
extends into Black-owned businesses, and Black landlords who
are facing this.
But what I will tell you is that these landlords are trying
to do the best they can. It is not in their best interest to
have people out on the streets. And I will say one of the
things I have seen here is that the lenders and the banks are
making adjustments to try and get this, but the piece that is
missing from this is the money that is in the system to make it
work. That is the piece that is missing. It doesn't move from
the renter to the landlord to the bank into our system if it is
simply not there. And that is one that we are really struggling
with.
So, it hits disproportionately those Black landlords, there
is no doubt about that, as well as Black tenants in communities
of color.
Chairwoman Waters. Thank you so very much.
I yield back the balance of my time.
I now recognize the ranking member, Mr. McHenry, for 5
minutes. Thank you.
Mr. McHenry. Great. Thank you.
Dr. Holtz-Eakin, generally speaking, do State, local, and
Federal revenues track the economy? Are they forward-looking
indicators? Do they lag? Can you give me some measure of this
for State, local, and Federal revenues?
Mr. Holtz-Eakin. Something like a sales tax, right?
Particularly in this event, we have seen dramatic changes in
the level of spending. You would expect that to be a
contemporaneous indicator. On taxes, we don't collect fully
until we look back and get the previous year. So, that is not
matched up quite as well. Property taxes--it depends on the
local administration, the degree to which you are marking
property values to market and thus keeping that up-to-date.
Corporate revenues track pretty well the current economy.
And the one that I think is the hardest to understand in
this moment is the large chunk of State and local budgets that
comes from fees, whether they are higher education, hospitals,
things like that, and how they are going to track in this
event. I have never seen an event like this before. I really
just don't know.
Mr. McHenry. Okay. But at this stage, where are we with
State and local financial conditions across the 50 States? Are
they all similar, are they different? Are there some
differences?
Mr. Holtz-Eakin. There will be differences. You will notice
the Governor of New Mexico singled out the world oil market
decline. Certainly, if you are heavily reliant on severance
taxes and things like that, it is going to look different than
most States. So, there will be differences. I think that
examination of individual cases is probably the best way to go.
My words in my opening were based on the aggregates; I didn't
do individual States.
Mr. McHenry. Right. But you would say that the revenue
falloff for States would be quite variable. North Dakota will
be different than California, California will be different than
Connecticut. Right? That is what we have seen in previous
falloffs of the economy or changes of economic condition.
Mr. Holtz-Eakin. Yes.
Mr. McHenry. So, are current financial conditions of State
and local governments a true indicator of the current economic
environment?
Mr. Holtz-Eakin. No. I think they are doing better, at
least from the aggregate data that we have through the second
quarter than the economy was. As I described in my opening
remarks, the economic conditions in the second quarter were
disastrously bad. If you look at the State-local sector in the
GDP release, it was doing remarkably well. Income taxes were
down by $100 million, just one-tenth of a billion. So, they did
better than you might expect in those circumstances.
Mr. McHenry. Okay. So, they are doing better. And the
Federal Government is spending a whole lot more. As I mentioned
in my opening statement, you only have 25 percent of the funds
set aside for State support allocated as of June 30th.
What additional Federal support do you think there should
be for State and localities based off your current research, or
is it too soon to tell?
Mr. Holtz-Eakin. I would say two things. First, the mystery
to me has been the performance of the Treasury in using
essentially half a trillion dollars to backstop facilities,
including the Municipal Liquidity Facility. That seems
underutilized in my eye, and I don't fully understand why that
hasn't happened. That is something that can and should be more
aggressively used.
My own research suggests that if you pretended that State
budgets tracked exactly the economy, then using the CBO's
forecast of the economy, the entire State and local sector
would be short by about $380 billion over 2 years. We have
already provided $150 billion, so that is another $230 billion
over 2 years, and that seems, to me, a sensible upper bound
given that we expect it to perform better than the economy for
the reasons I mentioned. Services aren't very heavily taxed and
income is concentrated at the upper end, so those are things
that are going to contribute to better performance.
Mr. McHenry. Okay. So how do you best help State and local
government get revenue? Isn't it through a sensible reopening,
rapid testing, and getting schools safely and effectively open?
Aren't those the stronger economic motivators that would then
benefit State and local governments?
Mr. Holtz-Eakin. No question. The foundation for success is
growth. And we need to get the capacity to go back to work
improved, the capacity to get kids to school so you can go back
to work, that has to improved, and we have to be able to
operate in the presence of this virus.
I think it is very instructive that in 2008-2009,
employment in the States and localities didn't decline for
nearly 2 years; it held right in there. It was after 2 years of
bad growth that things started dropping off. We don't want to
have 2 years of bad growth.
Mr. McHenry. Thank you, Dr. Holtz-Eakin.
Chairwoman Waters. Thank you very much.
I will now turn over the gavel to the Vice Chair of this
committee, Mr. San Nicolas.
[Audio difficulty.]
Chairwoman Waters. There is a problem.
Mr. San Nicolas. [Inaudible] Need for us to address the
circumstances [inaudible] Financial Services Committee with the
support of the university and [inaudible] Of Guam in the
hearing that have been joined [inaudible].
With that, Madam Chairwoman, the intent of this economy to
pursue the HEROES Act and the relief that it provides has less
to do with our [inaudible] More to do with us continuing our
mission of focusing on the need for us to address the
circumstances of every American. And so, we sought out
Governors, Democrat and Republican, because we want to get the
perspectives of every American [inaudible] And our Territories.
And so today, we have voices here today that are expressing
at the chief executive level within our States and Territories
to continue our focus on providing support, particularly with
respect to the responsibility the Governor have in delivering
critical services, fire services, emergency response health
services, and all the additional services we are required to
provide--
Chairwoman Waters. Mr. San Nicolas, there is a problem with
your technology, and so we are going to move on and we are
going to ask another Member to step in until they can clear up
your sound. I don't know what they have to do to do that, but I
think next--
Mr. Cleaver, as the subcommittee Chair, would you please
step in and continue with the next Member who will be asking
questions?
Mr. Cleaver. Yes, I will, Madam Chairwoman.
Chairwoman Waters. Thank you very much. I think the next
person up is Mrs. Maloney.
Mr. Cleaver. [presiding]. Mrs. Maloney, you are recognized
for 5 minutes.
Mrs. Maloney. Thank you.
I am chairing a committee meeting on the Census now, so I
need to get back. But this is so important. Thank you,
Chairwoman Waters, for having this hearing.
New York was one of the first and hardest-hit States by
COVID-19, taking the lives of over 25,000 of our friends and
neighbors, and disrupting our way of life. The pandemic toll on
New York's economy has created an insurmountable budget deficit
that the State cannot solve by itself. From March to May, tax
revenue was down 37 percent compared with last year. The
decline in State revenues, combined with the staggering costs
of responding to the pandemic, have created an unprecedented
economic crisis for our State.
New York State needs $30 billion in funding in the current
fiscal year and next year to make it whole again. And we are
not alone. Because of the pandemic, State Governments are
facing projected budget shortfalls of $500 billion next year,
which is even worse than what was ever seen during the Great
Recession.
As New Yorkers, we have seen the devastating health and
economic impacts of the coronavirus crisis. I refuse to stand
idly by and let the Senate's inaction exacerbate the pain the
pandemic has already inflicted, or allow it to jeopardize our
road to economic recovery. So, I am deeply thankful to the
chairwoman for holding this hearing.
Federal Reserve Chair Powell and other economists have
repeatedly stressed the important role that State Governments
play as employers. Research has shown that State layoffs and
budget cuts prolonged the Great Recession and delayed State and
local governments' economic recoveries. Since February, more
than 1.1 million government employees have lost their jobs
across the country. And that is on top of the nearly 30 million
Americans who remain unemployed and collecting unemployment
benefits.
In New York, our Governor has stated the State will be
forced to reduce funding for hospitals, schools, and local
governments by as much as 20 percent, when the services they
provide are needed the most. Without more funding, New York and
other State Governments will be forced to lay off tens of
thousands of State and local government employees, including
teachers, firefighters, and other civil servants who process
unemployment applications or inspect the food we eat.
So, to all of the Governors, this is a question to you, can
you speak to the effect that these budget cuts and mass layoffs
will have on your State's ability to recover long term?
Governor Walz. I will go first, and speak for Minnesota
again. Our 4-year projection drop-off on revenues is about $8.4
billion.
The one thing I would respond on some of the numbers of
what government expenditures are, is we are responding to a
global health pandemic, but we still have other jobs that we
have to do. We have to maintain the roads, we have to have
State patrol, we have to everyone else who does this work.
Just to give you an idea of the deficit that Minnesota is
looking at--and, remember, we had one of the highest percentage
rainy day funds, a triple-A bond rating, and were on track for
surpluses into the future. If you are looking at what happens
with State Government employees, if I furloughed all 38,000 of
our State employees, it makes up about 9 percent of that
deficit. You still have 91 percent that is there. And then, the
impact that would have on the economy of jobs and services that
would be provided.
So I hear all of you, and I hear this desire, and I just
want to say, I am in total agreement that getting our schools
up and running, getting our businesses back operating and
generating the economy--but it is a chicken or the egg, I
guess, for some of us on this call. None of that is going to
happen if we don't manage the pandemic. And that costs us a lot
of money as the State.
The States can be the catalyst and then get out of the way.
But, at this point in time, it doesn't matter if the State has
a mandate on or not, people are not going to restaurants, and
people are not spending the way they should.
And I think what Dr. Holtz-Eakin was talking about is true,
we are seeing savings at a high level, which in normal times is
a good thing. Not right now, because people are nervous. And it
is the State that provides a lot of those services.
Mrs. Maloney. Thank you, Governor.
Question two. The CARES Act provided $150 billion to
States, but because of restrictions on how they could use the
funds, policymakers and Governors complained the funds were of
little help for States like New York who have seen their
revenue dry up and expenditures skyrocket.
Let me be clear: This isn't a partisan issue or a New York-
based concern. Members on both sides of the aisle and our
delegation have written to Senate leadership explicitly
requesting additional--
Mr. Cleaver. Mrs. Maloney?
Mrs. Maloney. --flexible funding.
Mr. Cleaver. Mrs. Maloney?
Mrs. Maloney. Even Senate Republicans have expressed the
same concerns.
So, to put it simply, the need for additional--
Mr. Cleaver. Mrs. Maloney?
Mrs. Maloney. --funding is needed.
I see my time is up, but just very quickly, if the
Governors could say whether they would like flexibility to help
them, and flexibility in the funding, would that help the
State. And how would it improve your ability to address the
problems the pandemic has caused for your State?
Governor Kelly. I would like to respond to that,
Representative Maloney.
We were told at the beginning, when the money came in, that
it was to be for COVID-related expenses only. And I can assure
you that here in Kansas we are now in phase three of disbursing
those funds, and so sometime next week we will have expended
all of those funds on COVID-related expenses. We won't
[inaudible] No matter if we are given flexibility or not.
So it is imperative for Kansas and, I think, a lot of other
States that Congress follow up with the CARES Act, which I,
too, very much appreciated. We could never have gotten through
this time--
Mr. McHenry. Mr. Chairman, point of order.
Mr. Cleaver. Yes, Mr. McHenry, if you can hear me, I
apologize. We are going over time.
Mr. McHenry. Mr. Chairman, just in the interest of balance
of time, I think, my point of order is on the fair allocation
of time and adherence of time restrictions for all Members.
Mr. Cleaver. Yes.
Mr. McHenry. And I know the technology is quite limiting,
but I raise a point of order that we are not adhering to
committee rules.
Mr. Cleaver. Let me apologize, Mr. McHenry. You are
absolutely right. The problem was the switch, and I was unable
to get the attention of Mrs. Maloney.
Mr. McHenry. Thank you, Mr. Chairman.
Mr. Cleaver. There is no argument.
Mr. McHenry. Thank you, Mr. Chairman.
Mr. Cleaver. I will now recognize the gentlewoman from the
magnificent, and the great, not unmatchable, State of Missouri.
Mrs. Wagner. Thank you. I thank my friend from the western
half of the great State of Missouri, Emanuel Cleaver, a great
Member of Congress and a friend of mine.
And I thank our witnesses for joining us today to discuss
supporting our States and Territories during the COVID-19
pandemic.
I was very proud to vote for the CARES Act and for four,
total, bipartisan packages. The CARES Act provided $1 trillion
in funding to stabilize States and local economies and support
communities across the nation.
These dollars are critical in supporting health and public
safety operations as the pandemic continues to impact our
neighborhoods. In fact, in many places, our public safety is at
risk without these funds. Funds are needed to prevent law
enforcement layoffs, pay public safety officials, and help pay
for medical care, housing, and other essential services for
American communities and families.
I have been actively involved in trying to ensure these
funds get to those who need it most in my district. The CARES
Act was signed into law on March 27th, and in Missouri's Second
Congressional District, St. Louis County received $173.5
million in late April.
However, 4 months later, there is still over $100 million
of unspent Federal financial aid that desperately needs to be
distributed, including $47 million in a municipal reserve fund
for our local municipalities and localities that should have
already been spent in support, again, of public safety
officers, medical care, and housing, among other critical
services.
I have spoken to the municipal league multiple times and
our municipalities, and they need these funds now. They needed
them months ago. I am deeply disappointed that St. Louis County
has been unable to distribute these funds in a timely and
efficient manner, as we intended, as all of us intended, on a
bipartisan basis, in the CARES Act.
And I have had calls and meetings. I sent a letter again to
our county executive and counsel asking for them to distribute
these funds immediately. And I ask unanimous consent that his
letter be entered into the record.
Mr. Cleaver. Without objection, it is so ordered.
Mrs. Wagner. Thank you.
My story is not the only one. As of June 30th, per CRS,
only 25 percent of the funds provided by the CARES Act have
been used by States and local governments. And we need to get
to the bottom of why this is. I am sure that the answers vary
across States and regions, but having this information and a
breakdown of how funds have been spent and where funds are
needed is critical to lawmakers as we look forward to future
relief.
Dr. Holtz-Eakin, in your testimony, you highlight the
distinction between the Great Recession and the current COVID-
driven recession. Would you describe the role that State and
local governments played in each, Dr. Holtz-Eakin?
Mr. Holtz-Eakin. Certainly, in this recession, no one
caused it. It was the virus, and it was the natural reaction of
individuals to pull back from exposure to the virus that drove
the downturn. And so, States and localities had to respond both
to the virus itself--and they have spent, as the Governors have
specified, a lot of money trying to pursue the public health
mission as needed and to help health professionals as needed.
States and localities are also dealing with the economic
fallout of the pandemic, and that is concentrated in the UI
systems, which have been strained beyond capacity in many
cases. So, that has been part of the role thus far.
And I think, to understand my testimony, those are
legitimate concerns, there is no question. What I am trying to
do is gauge, above and beyond that, how much additional revenue
loss you have to be concerned about, given that there is a
Municipal Liquidity Facility and that the tax base is probably
going to hold up better than in the past.
That is what is going on right now. In 2008-2009, it was
very different. It was a completely different episode. This is
a self-inflicted wound, a cut that started in the financial
sector and spilled over. They didn't have a public health
mission they needed to deal with. They didn't have to have the
same concerns about the massive UI that we are seeing right
now. By and large, they were able to pay State employees for 2
full years. By and large, they were able to manage more
successfully. But, with poor growth, eventually it caught up
with them, and we did see a prolonged slow recovery in the
State and local sectors.
Mrs. Wagner. What type of congressional support does the
economy need during the ongoing COVID-driven recession?
Mr. Holtz-Eakin. I think Congress did exactly the right
thing in the CARES Act.
Going forward, I would think it needs two things.
Number one, it needs to support making places and schools
safe. That means PPE, testing, workplace modifications, the
kinds of things that allow you to proceed in the course of the
virus and operate successfully. That would include, in my view,
liability protections as well, that it is safe to operate and
use a facility.
And, also, we will need to keep an eye on those who have
prolonged spells of unemployment and income support for that
segment of the population. Those are concerns.
Mrs. Wagner. I appreciate that.
And I don't know if you have any opinion as to why it is
that only 25 percent of these funds, these Federal funds that
we allocated months and months ago, are still not getting to
the point--Governor Walz, I saw your hand. Please, sir?
Governor Walz. It's good to see you, Congresswoman. And you
are exactly right. It is a really good question.
One of the reasons we were a little slow here is, the
legislature couldn't agree. We moved 50 percent of it to our
counties right away, and what I want to tell you is, it is the
obligation versus the spent. Our budget has, as I said, 92
percent. I can assure you that it will be spent by December
31st. And most of it, in our case, went to local county
commissioners and city councils.
Mrs. Wagner. And our Governor got the money out. I am upset
at the fact that St. Louis County is not getting the money out
to my municipalities and my local jurisdictions.
I know I am over my time. I don't want to exceed the Chair
here, so I will yield back. But I thank you all very much.
Mr. Cleaver. Mrs. Wagner, your time has expired, but I am
giving you some extra time because Mrs. Maloney ran over, if
you want to complete your questions.
Mrs. Wagner. Thank you, Congressman Cleaver. You are very,
very kind, and such a wonderful gentleman. I am fine. I yield
back. And we will move on with haste through the rest of my
colleagues. Thank you so much.
Mr. Cleaver. Thank you.
Ms. Velazquez, you are now recognized for 5 minutes.
Ms. Velazquez. Thank you, Mr. Chairman.
And thank you all for your great testimony and for sharing
with us your insight as to how can we tackle this pandemic.
Governor Walz, because of the current crisis, States and
local governments could face budget shortfalls of $500 billion
through Fiscal Year 2022. Moody's chief economist, Mark Zandi,
has warned that the entire national economy will sink if we
don't support the States.
What do you foresee happening to the national GDP over the
next 24 months if we do not support State and local
governments?
Governor Walz. Thank you, Congresswoman, for the question.
And, like so many of these things, I think we have a lot more
agreement here than we might think.
We are facing a $4.7 billion deficit. And I went from
Congress, with many of you, to the States; I cannot deficit-
spend. I have already had to make decisions to close
facilities, corrections facilities and other things, because I
am statutorily obligated to do that. That starts to have a
trickle effect, especially in greater Minnesota, as we call it,
in the rural areas, where these are important employers.
And so, again, I hear where you are at, I hear this
concern. We need to be very thoughtful of where we put things,
the money out. But we see the drag. And I have been hoping the
whole time that we would see a V-shaped recovery. Our
economists are a little less hopeful of that right now. I know
that some of the projections have reduced the upcoming third-
and fourth-quarter GDP of what it will be, but I am concerned
about that.
Here is what I can tell you from a State perspective. I
have to start planning scenarios across-the-board of what that
would look like. And I think everybody on here would ask us--we
should always be thoughtful, we should always be doing that,
but this is not cutting fat; this is cutting bone. And the
problem I have right now is, it is the very things we would
have to cut that are going to spur the economy to come back,
that we are seeing go down.
So, I am worried about that. These deficits are real. They
are not speculation for us. And I think many of you on here, I
know you are fiscally responsible, and you think about this.
When that number shows short and we get to the end of June, I
have no choice but to cut. And those cuts have an implication.
Ms. Velazquez. Thank you, Governor.
Governor Walz. I think the other Governors can speak to
where they are at. And each State is in a little different
spot. But I think, if I could speak for the National Governors
Association, the overriding factor is, because of the ongoing
nature of this and that it is not done, the uncertainty to
State budgets is so damning that it makes it very difficult to
plan.
Ms. Velazquez. Thank you, Governor.
Governor Guerrero, like Guam, COVID cases are surging in
Puerto Rico. There have been more than 16,000 positive cases
since the pandemic started, and just yesterday 18 Puerto Ricans
died because of the virus.
How would the territorial provisions included in the HEROES
Act help Territories like Guam and Puerto Rico fight the surge
and spread of COVID-19?
Governor Guerrero. Yes, thank you for that question.
I just want to also make it clear that we are using our
COVID virus funds. I have given it out to small businesses. I
have given it out to individual grants. I am giving it out to
reach medical clinics and facilities, because my greatest
concern in this whole COVID pandemic is the stability of our
healthcare system to deliver the quality of care that is needed
to have a healthy community. And when we have a healthy
community, we will have a healthy economy.
So, the coronavirus fund, Representative Velazquez, is very
much helping not just our Guam but also all of the other
Territories. And what I had wanted to ask, which I did in my
testimony, is our ability to use flexibility of those funds to
make sure that we do continue employing those employees that
provide the public services. And my budget now, we are arguing
with our legislature. I stand to lose employees because of our
cuts from Fiscal Year 2020 to now Fiscal Year 2021.
So, like all of the other Governors, we are certainly
making good use of those moneys. We are allocating it out, and
we have budgeted it out. We have paid for PPE, we have paid for
testing, we have paid for hazardous pay and differential pay
for our frontliners--
Ms. Velazquez. Thank you very much.
My time is running out. I just would like to ask another
question to--I guess my time is up.
Mr. Cleaver. Yes. Thank you, Ms. Velazquez.
Ms. Velazquez. I yield back.
Mr. Cleaver. Thank you.
Representative Posey, you are recognized for 5 minutes.
Mr. Posey. Thank you, Mr. Chairman.
As the ranking member pointed out earlier, and almost every
Member on this side pointed out at the last hearing, instead of
holding more hearings on a bill that has already passed in the
House, I think we should be putting a priority on the elements
of virus relief that go to the working families of this
country.
Additional direct payments extending the Paycheck
Protection Program, shoring up unemployment insurance at an
adequate level, things of that nature--our constituents are
waiting while the House holds them hostage to the Majority's
priorities. We need to make the hardworking men and women and
their families our national priorities.
Today, we are holding a retrospective hearing on aid to
State and local governments. The Majority leadership wants a
trillion dollars for that purpose. There's no doubt that some
State aid and local government aid may be warranted, but I have
not seen a rigorous analysis of the need or the assumptions and
principles that underlie a fair distribution of such aid.
We should advance assistance for documented and
extraordinary coronavirus expenses. We should ask ourselves,
what is the estimate of the coronavirus expenses thus far
covered? Replacing State revenue is fraught with challenge. Is
it fair to replace all of the lost revenue of States that have
dramatically different revenue burdens per capita?
For example, a 2020 report from the Tax Foundation ranks
New York State as the number one in State and local revenue
burden, excluding the District of Columbia, of course. New York
raises $15,238 per person. That is men, women, and children,
not just taxpayers. By comparison, Kansas raises $9,192 in
State and local revenue per person and ranks 24th.
One might hope that the high-tax States have lower debt
burdens, but that is not the case. New York carries a State and
local debt burden of $17,879, more than its annual per capita
revenues, and ranks first in debt per capita. Kansas, on the
other hand, has a State and local debt burden of $9,335 per
capita and ranks 17th.
Governor Kelly, would it be fair to replace the COVID-
related revenue losses of all of the States, dollar-for-dollar?
Wouldn't it be unfair to States that have a more disciplined
approach to government and its size?
Governor Kelly, are you there?
Mr. Cleaver. Governor Kelly?
I don't know, Mr. Posey. We may be having a technical
problem again.
Governor Kelly? You may need to unmute.
Mr. Posey. Perhaps, if we have lost communication, sir, I
might submit these questions in writing for the record, and she
can respond to us in writing, if that is okay with you, Mr.
Chairman?
Mr. Cleaver. Yes, absolutely.
Mr. Posey. The next question would be how we should
determine the amount and the distribution of State and local
aid to make it fair and adequate, what are the major items that
we need to fund, and how should we estimate them?
And then, third, I was wondering what amount of COVID-
related expenses have already been spent in your State, that
have not already been reimbursed by the Federal Government,
were provided for in the previous Federal bill?
So, with those questions for the record, Mr. Chairman, I
will yield back the remainder of my time.
Mr. Cleaver. Okay. Will the staff please make sure that we
get those questions to Governor Kelly? Thank you, Mr. Posey.
The Chair now recognizes Mr. Sherman for 5 minutes.
Mr. Sherman. Thank you.
Dr. Holtz-Eakin pointed out that we can't look at this
recession and its effect on State and local governments as just
a replay of 2008, and he is right, because this time the State
and local governments are being hit by a double whammy.
Revenues are down, the same as 2008, but expenses are up,
because while a financial crisis doesn't require a big public
health response, a pandemic clearly does.
I used to head the largest State and local tax agency, and
I am not surprised to see revenues in California have taken a
plunge. We went from a $5.5 billion surplus to a $54 billion
deficit. And the Urban Institute says that California revenues
have declined by 46 percent.
The question is, how can States respond? The argument is,
they could raise taxes, which is exactly the wrong thing to do
in a recession from its overall economic impact.
Second, although the HEROES Act would solve this, we have
taken away the State and local tax deductions, and the
ideologues that pushed that provision did so because, they
said, that would make it very difficult for States to raise
taxes. And the competition for upper-income taxpayers, plus the
elimination of the State and Local Tax (SALT) deduction, means
that those State and local taxpayers are one-third more
expensive for those mobile--could move out of the State--upper-
income taxpayers.
And, finally, as Governor Walz points out, they can't
deficit-spend. They have higher expenses, and lower revenue,
and can't raise taxes--can't and shouldn't raise taxes, and
can't deficit-spend. The only lifeline is the Federal
Government.
I want to welcome back, especially, the two Governors who
were our colleagues so recently.
Governor Walz, you testified that, between February and
May, Minnesota went from a $1.5 billion surplus to a $2.5
billion projected deficit. The HEROES Act would extend at least
$950 billion of Federal aid to State and local governments
nationwide. Mitch McConnell has a bill with less than a fifth
of that amount.
Now, many Republicans have pounded the table and said, we
cannot defund the police. I have faith in State and local
governments to spent the right amount on public safety and the
right mix of sworn officers and other ways to deal with public
safety problems.
But, in my City of Los Angeles, over 40 percent of the City
budget goes for public safety. So, the one thing that would
prevent my City and many States from spending the right amount
on public safety is if they don't have the money.
I know what the answer is for Los Angeles, but, Governor,
if the HEROES Act doesn't pass, are Minnesota and its local
jurisdictions going to have to spend less on police than you at
the local level think is necessary?
Governor Walz. Thank you, Congressman.
The answer is, yes. For us at the State level, our two
biggest expenditures, of course, are healthcare and education.
At the local level, as you stated, it is public health and
public safety, in many cases. So, that is their only
alternative.
And you are right. The issue is, we could deal with that
simple equation, cut services or increase revenue, both of
those work against us in a recovery. And so what we are asking
for--and, again, this should be--
Mr. Sherman. I want to squeeze in a couple more questions.
Governor Walz. Sure. But you are right, it makes a
difference.
Mr. Sherman. Lee Saunders, the president of AFSCME, says
that over 1.2 million public-sector employees have lost their
jobs since February.
Expressing concern over this trend, Fed Chair Jay Powell
recently noted, ``It will hold back economic recovery if State
and local governments continue to lay off people and if they
continue to cut essential services.''
And keep in mind, when you lay off State and local
employees, you hit the economy in two ways. First, the
employees don't have money to spend in the economy. And second,
nobody is doing their job if they have been laid off. It takes
longer to get a permit, longer to form a corporation, longer to
start a business, longer to build a building. So, as Chair
Powell points out, you cut essential services that are critical
to the economic recovery.
Governor Grisham, are you anticipating the possibility of
public employee job losses in your State if we fail to pass the
HEROES Act?
Governor Grisham. Congressman, I appreciate the question.
Our unemployment jumped 4 percentage points at the
reporting of the last quarter, and that is largely to public-
sector employees, largely at local government. We tapped into
our 25 percent reserves to avoid furloughs and layoffs, but if
we don't get additional support, you are going to see that
exacerbated at the State level and--
Mr. Sherman. I want to try to just get in one more
question, and that is, Medicaid goes up in a crisis like this.
The CARES Act changed the formula with a 6.2 percent increase
in the Federal contribution to Medicaid. The HEROES Act
proposes another 7.8--
Mr. Cleaver. I'm sorry, Mr. Sherman. Your time is up.
Mr. Sherman. I will submit it for the record.
Mr. Cleaver. Okay. Thank you.
The Chair now recognizes the gentleman from Missouri, Mr.
Luetkemeyer.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
And I am sorry that Chairwoman Waters is not here, because
I would like to get into a dialogue with her for a comment she
made in her opening remarks.
I don't want to discuss or debate the situation with
regards to--my comment is with regards to her comment where she
said that it is within our jurisdiction, because we chose to do
it. That has to be one of the top 10 most arrogant and
ludicrous statements I have heard in all of my time on this
committee.
Congratulations, Madam Chairwoman.
For those people watching, they see this as an example of
exactly what is wrong with the House today. The party in charge
believes that they can do whatever they want without regard to
rules or jurisdiction or process. Again, breathtaking.
Dr. Holtz-Eakin, thank you for being here. Your initial
statement was really a breath of fresh air from the standpoint
of giving us a lot of good information of where we really stand
with the economy, who is doing well, and who is struggling. And
I think that is what we need to be able to put together another
bill here, if we need to--number one, figure out if we need
to--and where to target that relief. We certainly appreciate
your information.
I sit on the House Select Subommittee on the Coronavirus,
and we had a hearing just last week with Secretary Mnuchin.
And, in that hearing, we discussed all of the different things
that went on with regard to the Administration's response to
all of the different facets of the economic hardships that we
are going through--local, State, individuals, whatever. And all
of the people on the committee, both Democrats and Republicans,
were pretty complimentary of the Administration with regards to
everything.
And the total focus was on this issue we are talking about
today with regards to State and local money. The focus in our
committee last week was: Just put as much money in there as you
can, and the States are going to figure it out. They are going
to be able to get everything they need, and they will be able
to balance their budgets.
I certainly appreciate your response with regards to
targeting it, and one of them was to the schools. To me, this
is a target area we need to be putting money into.
I would like to just have your opinion. I know that, in the
Senate bill, the economic stabilization fund is $105 billion;
$70 billion of it goes to elementary or secondary education.
Would you like to comment on what you feel, is that an
appropriate amount? Should it be more or less? How should we
target that?
Mr. Holtz-Eakin. I don't know the right number. But the way
I think about this for the schools is, it is quite likely we
will have to continue to operate in the presence of the virus.
I know people are optimistic about the vaccine development
prospects, but between the inevitable uncertainties about
success and the questions about take-up rates and how quickly
we are effective in eliminating the virus, I think you have to
think about 2021 as operating in the presence of the virus.
To do that, we have to be able to make the schools safer.
And that means changing them physically so there is more space,
providing PPE, testing, heavy, aggressive development of
therapeutics. The money should be devoted to those tasks, not
just a blank check.
Mr. Luetkemeyer. One of the ways that you could get the
money is through a direct payment to the schools on a per-pupil
basis. Another way is to give the money directly to the States,
and let them divide it up however they want to. What would you
suggest to make sure that we get the money in the proper amount
to the proper folks?
Mr. Holtz-Eakin. For businesses, I think the right thing to
do is to give it directly to them through a refundable credit
against their payroll taxes.
For not-for-profits--when you start thinking about schools
and other entities like that, you want to mimic that in some
way and try to get it directly in there to reimburse and
guarantee them that if they undertake an expenditure to modify,
to make things safer so they can operate, they will get support
for that.
Mr. Luetkemeyer. One of the things--I had a discussion this
morning with Director Calabria of FHFA and talked to him about
his forbearance program and the past-dues, and it seems as
though it is working. People are actually paying down their
loans, even though they are in forbearance. His past-dues are
going down, which would sort of align with the comments you
made a minute ago.
But to me, to make sure we keep this going, I think
forbearance is a really big issue that, from the regulatory
side, if we don't have the regulators give forbearance to the
banks and credit unions who are in charge of most of the
lending in this situation, and they then are forced, as in 2008
and 2009, to foreclose on and get rid of entire lines of
credit, it could really upend what we are doing here.
I have a bill out there that basically gives 2 years of
forbearance, so that gives time--and you indicated, this is a
different kind of recession that we are in here than before.
And it gives time to get everybody back on their feet, which
you say is actually happening. What would you think of that?
Mr. Holtz-Eakin. I think you have diagnosed it correctly.
We don't want this to turn into 2007-2008. It hasn't been, so
don't let financial problems accumulate. Make sure that you
address the real problem on the ground, which is, make sure
those people who do not have income have enough to not have to
ask for forbearance, and, where there is forbearance, make sure
that we don't just leave them with the bill and cause them to
have to start pulling things back.
Mr. Cleaver. Thank you, Mr. Luetkemeyer.
Mr. Luetkemeyer. Thank you. My time is up. I yield back.
Mr. Cleaver. Thank you very much.
Let me mention before we go any further that Governor Kelly
will be unable to complete the hearing with us today, but we
appreciate very much her willingness to be with us for the
period that she was.
And I want to respond for the chairwoman: ``As described in
the committee's rules, the committee has jurisdiction over
financial aid to all sectors and elements within the economy
which directly relates to the effort by States and Territories
to navigate the pandemic. After all, State and territorial
governments are on the front line of the response to the
crisis.''
Mr. Luetkemeyer. Not to be argumentative, Mr. Chairman, but
my comment--again, I prefaced my remarks by saying I did not
argue about the jurisdiction, whether we did or did not have
jurisdiction. My comment was with regards to her statement that
we can do whatever we want to do. That is not--
Mr. Cleaver. Noted.
The Chair recognizes now Mr. Scott from Georgia.
Mr. Scott. Thank you. In my State of Georgia's legislature,
Georgia's Speaker of the House, David Ralston, who is a
Republican, and a good friend of mine, sent a letter to
Congress in August, just a few weeks ago. And in this letter,
Speaker Ralston is asking Congress for more financial help.
And I request at this time, Mr. Chairman, permission to
enter Speaker David Ralston's letter into the record.
Mr. Cleaver. Without objection, it is so ordered.
Mr. Scott. Now, in his letter, Speaker Ralston--and let me
just say, he is a friend. He and I worked together for many
years during my days as a State senator in Georgia and as I was
chairman of the Senate Rules Committee. So, this is a good man
here. And he is a very conservative Republican.
He is asking Congress in this letter for $500 billion for
his State, and he writes, ``inflexible financial assistance.''
And he notes this. He says that the reserve funds, or rainy day
funds, is a part of the fiscal toolbox indeed. But he gives us
this warning: We must not rely solely on declining reserve
funds, or rainy day funds, for it is unsustainable.
So, Governor Walz, let me start with you. Given the
uncertainty of the trajectory of this virus so far, are you
confident that reserve funds or rainy day funds can sustain
these States during this COVID-19 crisis?
Governor Walz. No, absolutely not. And as I said,
Representative Scott, we had, percentage-wise to our State's
budget, one of the most robust in the nation's rainy day funds,
but it can't take this. It was just too deep.
Mr. Scott. Now, let me go to another question.
In the CARES Act that we worked on and passed in March, it
included $150 billion in assistance to help the States and the
local governments.
However, in my State of Georgia--and I think it is
applicable to other States--right now, only 30 percent of that
funding for local and city governments in Georgia has been
allocated, which leaves 70 percent of the funding unallocated.
And this is despite deadlines for cities to receive and use
these funds before the end of the year.
Now, we have trouble in River City here, and this is
plaguing us. So, Governors, tell us, is there any problem? Are
there restrictions or limitations? What is it that is slowing
down our States' abilities to get badly needed funds to our
local governments and cities who need it so desperately? And
what can we do to help you?
I will start with you, Governor Walz, and then the other
Governors. This is a big problem.
Governor Walz. First of all--and I would just say, I
appreciate the focus on this, and we should be--I think what
you are seeing is a data lag in spending allocation and getting
it out there. I can only speak for Minnesota, but the money is
out there in the locals. They are doing it.
One of the things is that we planned the whole budget. You
are not going to see September's, October's, November's, and
December's spending right now. So, basically, if you go back to
where we got this, and we are looking at the 6 months of this
pandemic, we have 4 more months that we have to deal with, and
that is where we have allocated.
Now, I heard Representative Wagner. I am not going to speak
for all of the problems that are out there. I can speak for the
State of Minnesota. We are allocating, paying in a timely
manner and are budgeted to December 31st. My biggest fear,
Representative, is that we will fall off a cliff.
Mr. Scott. Thank you very much.
And I will end my comments with this. Thank you all very
much. Your testimonies have opened our eyes to much of what we
were only dimly aware of, so thank you.
Mr. Cleaver. Thank you, Mr. Scott.
The Chair now recognizes Mr. Barr.
And I will also state that, after Mr. Barr, Mr. San Nicolas
will assume his rightful role as the Vice Chair and will
complete this hearing.
So, the Chair recognizes Mr. Barr for 5 minutes.
Mr. Barr. Thank you, Mr. Chairman.
It's good to see all of my colleagues, including some of
our former colleagues who are now chief executives of their
great States. And thank you all for offering your views on this
issue.
I think a lot of the witnesses have testified that what is
ailing a lot of State and local governments is a decline in
revenue. Dr. Holtz-Eakin pointed out that it may not be as
severe as the financial crisis, but, nevertheless, there is a
decline in revenue. And I think one of the reasons for that is
that we have had some shutdowns of businesses to respond to the
public health crisis.
So it seems to me that the most important component to
economic recovery and for strengthening State and local
revenues and the fiscal stability of State and local revenues
is for businesses to safely reopen, for economies to safely
reopen, and for businesses to reemploy workers so that they can
continue to generate tax revenue to rebuild the tax base.
The government-imposed shutdown of the economy left many
businesses unable to operate. And we need those businesses,
businesses of all sizes and across all industries, to reopen
with appropriate safety precautions in order to rebuild the tax
base.
One of the suggestions on how we can facilitate the
reopening of those businesses is to give those businesses
confidence through reasonable liability protections. This is
the cure, at least in part, for what ails our State and local
governments.
Unfortunately, in many of the States indicating they are
suffering from budget shortfalls, there is really no realistic
plan to get people safely back to work, or they continue to
keep the economy shut down, or they are failing to entertain
liability protection. And it doesn't look like Congress is
seriously entertaining liability protection nationwide.
Dr. Holtz-Eakin, beyond the assistance measures already
implemented by Congress and the Administration, what
legislative provisions do you view as essential to helping
businesses safely reopen, bring back their employees, and bring
back their customers? And is liability reform part of that?
Mr. Holtz-Eakin. Yes, I think it is part of that.
The goal is to be able to operate in the presence of the
virus safely. That will require some physical modifications, in
some cases, whether it is PPE or distancing or plexiglass or
whatever it may be, moving production lines further apart. And
that will cost some money.
It will require an owner being willing to open the doors
and bring the employees back. And that is the liability piece.
If you are afraid that you are going to be hit with a big
lawsuit and enormous costs if you just open the doors, then you
won't do that, and we won't recover as fast.
So it strikes me that is a sensible piece of a portfolio
that helps everyone adjust to the presence of the virus for as
long as they need to and continue to go to work safely, go
engage in commerce if you are a customer safely, and have the
economy perform better.
And that is the best thing for household incomes, for State
and local revenues, for the things that disappeared so quickly
when the virus arrived.
Mr. Barr. I think frivolous litigation is a huge threat to
State and local governments rebuilding their economies,
rebuilding their tax base.
Governor Walz, do you agree or disagree with that? And it's
good to see you again.
Governor Walz. It is good to see you, Representative Barr.
And, first of all, what I do agree with in your statement:
The surest way for our States to get back in good shape is for
our businesses to get going again. And the surest way for that
to happen is for us to get a handle on the virus.
I would say that--and this may be philosophical--I don't
see the importance being overstressed on the liability piece,
because here is the thing: People are going to go back to a
restaurant when they feel they are safe to be in there. Just
like right now, people, if they go to a restaurant, they know
they are not going to get food poisoning because we have
inspections and they know that it ruins their market chance.
Just to have a liability protection, that alone won't do
it. They have to believe that it is worth going back. That is
the problem with this, that even States that don't have
mandates on businesses being closed, they are still not
bouncing back, because the public doesn't have confidence.
I don't want to understate how risky it is for businesses
right now. It is risky for their employees, it is risky for
them, and it is risky economically.
Mr. Barr. Yes, Governor, fair point. I think it may be a
combination of both.
Final question to Dr. Holtz-Eakin: Advance refunding, any
thoughts about bringing back the tax exemption for advance
refunding so that municipal governments can refinance under
these low rates?
Mr. Holtz-Eakin. I have not really studied that issue
carefully. I think I would be best off giving you an answer for
the record. I would be happy to do that.
Mr. Barr. Thank you.
I yield back. Thank you very much.
Mr. Cleaver. Thank you, Mr. Barr.
Mr. San Nicolas, are you with us?
Mr. San Nicolas?
Mr. San Nicolas. Mr. Cleaver, can you hear me?
Mr. Cleaver. Yes.
Mr. San Nicolas. [inaudible.]
Mr. Cleaver. I think we are still having some problems. So,
let me go to Mr. Meeks, and the staff can let me know when the
sound is better.
The Chair now recognizes Mr. Meeks for 5 minutes.
Mr. Meeks. Thank you, Mr. Chairman.
Let me first thank Chairwoman Waters for her leadership in
making sure that we had this hearing today.
And I also want to thank the Governors who have testified
before us today, including my two colleagues whom we miss, and
we thank you for the job that you are doing in your respective
States.
And I want to commend the Governors across the country,
who, for the most part, have done great work leading our
nation's response to this COVID-19 pandemic and, I believe and
I think, clearly, in the total absence of leadership from the
Trump White House.
Let me also say that, as I know, the Governors Association
is a bipartisan association. There are Democratic Governors;
there are Republican Governors. And they all have put in for
this $500 billion that they think that they need so that they
can recover themselves. So, this should not be a Democrat or a
Republican issue. It is something that is important to the
States, all of whom are suffering from this pandemic.
And I know, for my part, the lack of having some direct
Federal intervention earlier in New York--there was basically
no support from the Administration. Governor Cuomo, Mayor de
Blasio, my City of New York, and the Members of the New York
congressional delegation scrambled to do everything and
anything that we could to bring assistance to impacted
communities and find resources for overstretched healthcare
facilities and frontline workers and relief to impacted
families and to local small businesses.
I think, as Representative Maloney had said, New York City
lost over 23,000 lives to COVID-19. And my district was among
the hardest hit nationally. And I can tell you from firsthand
experience, that the broader social and economic toll of COVID-
19 will be felt for generations.
This is why it is all the more enraging to learn yesterday
that President Trump and his Administration were not only
incompetent in their mismanagement of the crisis but
deliberately misleading the public and purposely making the job
of Governors and local officials more difficult by willfully
spreading misinformation about COVID-19 as far back as early
February.
These lies and this incompetence has costs tens of
thousands of lives, hospitalized many times more, and has
disrupted millions of families through a loss of a loved one,
job losses, and financial hardship.
The COVID-19 pandemic has also wrecked the budgets of
States and cities, which risk being a drag on the economic
recovery and causing further financial hardship for the
hardest-hit communities.
And New York is no exception. As we incurred significant
expenses on healthcare and other costs associated with tackling
the pandemic and are seeing a collapse in tax revenues from the
broader economic impact of COVID-19, New York State faces over
a $30 billion deficit over the next 2 years, and New York City,
over a $9 billion deficit--a $12 billion deficit over the next
2 years.
This is all made worse by the SALT deduction cap of the
Trump tax cuts, which have caused serious fiscal harm to New
York.
If the Federal Government doesn't pass the $500 billion
requested by our nation's Governors, which was included in the
House stimulus bill, cities and States across the nation face
serious financial hardships, which will be a drag not only on
the local economy but on the broader American economy.
Cities and States can't simply tighten their belts to close
their gaps. These deficits represent potential cuts to the bone
in public transit, healthcare, education, social programs,
sanitation, fire departments, policing, and so many other
public services that impact all Americans, but especially those
least fortunate, who have already borne the brunt of the burden
of the pandemic, including, in particular, communities of
color.
Cities and States are also major employers. And in New York
City alone, the mayor has already indicated that he may have to
furlough 22,000 employees as a result. And I heard Governor
Grisham talk about the 4 percent of individuals who may have to
be laid off in New Mexico if this is not taken care of.
I will ask Governor Grisham first, what are your best
estimates of the total job losses, both directly and
indirectly, and the risk if, as asked by the Governors
Association, you don't get the $500 billion in Federal support
for local governments?
Governor Grisham. Thank you, Congressman. I will wait and
see if I have permission to answer.
Mr. Cleaver. I will tell you what, Governor, I am going to
turn this over to Mr. San Nicolas, and he can make the
difficult decisions at this point.
So, Mr. San Nicolas, you are now recognized as the Chair of
the committee.
Mr. San Nicolas. [presiding]. Well, except, at this time, I
really think my sound still isn't working. No luck, it seems.
If my colleagues will indulge me, I would like to afford
the Governor the opportunity to respond at this time.
Governor, if you can just provide a really quick response?
Governor Grisham. Thank you very much. I appreciate that.
Congressman Meeks, it is hard to identify exactly what
those losses would look like. It depends. Right now, I am going
to have about a half-a-billion-dollar shortfall in education. I
have already had to take a $200-billion-plus reduction to
education for just Fiscal Year 2021.
The reality is that we are laying off educators, and public
education department workers. We could see that 12 percent
unemployment, with that additional--went from 8 to 12--we could
see that sustained well into Fiscal Year 2022. It is
immeasurable at this point.
And I am going to end with this. We still have to spend
money and manage the pandemic. New Mexico is a Statewide public
health responder, and we know that without getting the $500
million that the bipartisan National Governors Association has
indicated, we can't do it.
And I appreciate your frustration, Members, about whether
money is getting where it needs to go and whether we are doing
enough. We didn't have the guidance or the flexibility from the
Federal Government to even determine how we reimburse and
identify strategies for expending those funds. And, to date,
most States are at least at 70 percent allocation or
expenditures, and so is New Mexico.
Thank you.
Mr. San Nicolas. [inaudible.]
I am having some [inaudible].
Mr. Cleaver. We are still having some problems with Mr. San
Nicolas.
I now recognize Mr. Tipton for 5 minutes.
Mr. Tipton. Thank you, Mr. Chairman. I appreciate the time.
It's good to be able to see our colleagues again. Governor
Grisham was right across the hall from me in the Cannon
Building. And, Governor Walz, it's good to see you again as
well.
I do represent rural Colorado, where our local governments,
local hospitals, housing authorities, and many other
government-backed rural services know not to expect too much in
terms of Federal funding, even as it came out of the CARES Act.
Dr. Holtz-Eakin, if you could maybe speak to the importance
of making sure the Federal spending is targeted, especially for
the less populated parts of the country that need to be
prepared for the coronavirus?
Mr. Holtz-Eakin. I think that, in the biggest picture, this
is an enormous undertaking by the Federal Government. It is the
wrong moment to not do things for budgetary reasons, but there
is no excuse for doing things in a wasteful fashion and raising
the deficit above the $3.3 trillion the CBO already estimates
it to be for 2020. And, going forward, the same pressures will
prevail.
So it is a moment to use money wisely and to use it
effectively. And I think that calls not for blanket funding--we
did that in the spring to help everyone have money to hide from
the virus. That strategy was successful for 2\1/2\ months, but
now we have to do a different strategy, one where we target our
real needs and allow people to operate in the presence of the
virus for as long as we need to.
Mr. Tipton. Great.
I would like to be able to follow up just a little bit. It
is important to be able to get the economy moving again. We are
starting to see the doors open up, revenues are starting to
flow back into local governments, and State Governments as
well. And I think Governor Walz made a fair point in regards to
food safety. We want to make sure that everybody going in, is
going to feel safe.
And I did want to go back to the point of being able to
have liability protection, which you had noted earlier. Why is
that going to be important to be able to give not only the
consumers safety but also to give the businesses safety in
terms of opening up once again?
Mr. Holtz-Eakin. You want businesses to open, and that
requires three parties to feel secure in making that move: the
workers have to feel secure in their physical surroundings and
their protection from infection; the customers have to feel
secure in the same thing; and the business owner has to both
provide that and feel secure that they will not be punished for
any inadvertent infections that may be carried in or didn't
even occur on that property.
That seems, to me, a very sensible step. If it turns out
there is no real risk of that happening, it is a redundant
step. I don't see the harm in doing it.
Mr. Tipton. Great.
And would you maybe give a couple of comments on the best
way to be able to provide support for low- and moderate-income
communities and rural places? Do you have any thoughts on that?
Mr. Holtz-Eakin. There are two different things that--there
has been the ongoing issue of the rural areas lagging the rest
of the U.S. economy prior to the pandemic and the need to make
sure that, in particular, the education systems are adequate to
generate the skills necessary to attract businesses in those
communities, make sure the infrastructure, including broadband
infrastructure, was adequate.
Those have been heightened in the pandemic. There is
probably no time where it is more important to close the
broadband divide than now. Businesses are relying on it.
Schools are relying on it. Households that didn't think they
needed it, now need it. And I think that is something to think
very hard about. That is a targeted use that the Federal
Government could be very effective in providing.
Mr. Tipton. We are seeing some of that just during the
hearing today--
Mr. Holtz-Eakin. Yes.
Mr. Tipton. --with Mr. San Nicolas, in terms of just being
able to have some good broadband connections going on.
Do you believe it is imperative for Congress to continue to
provide support for small businesses to keep those businesses
afloat and the employees on the payroll?
Mr. Holtz-Eakin. I think it is a very good idea to keep in
place a Paycheck Protection Program as modified--obviously, the
first time through, it didn't hit all of the needs. There are
probably even bigger needs out there. There are some people
whom we are just not seeing in the data who have, I hope,
struggled and will continue to try to operate their business,
but I am afraid we are losing a lot of businesses. And each
business we lose represents employees who will have to find a
job somewhere else in the economy, and that is the thing that
takes time and brings some economic pain.
Mr. Tipton. I appreciate your comments. I visited with a
restaurant owner yesterday in my district, who said her
business was saved simply with the Payroll Protection Program,
the economic injury disaster loans that came through. They were
within a few days of shutting down. But they do need to be able
to get that business open and to be able to operate once again
and to be able to create revenues for the people that they
represent.
And I fully concur with you in terms of throwing out a
broad blanket. Let's make sure that we do have it targeted. I
think it is worthy of note, just in the Senate, that they have
not passed a coronavirus bill. We need to be able to work
together to get the economy going.
Thank you, Mr. Chairman, and I yield back.
Mr. Cleaver. Thank you very much.
The Chair now recognizes the gentleman from Texas, Mr.
Green, who is also the Chair of our Oversight and
Investigations Subcommittee, for 5 minutes.
Mr. Green. Thank you, Mr. Chairman, and I thank the ranking
member also, as well as Chairwoman Waters, for this hearing.
There are things that happen in the course of history that
sometimes will cause us to deviate from our planned program of
activities. Such a thing has occurred today in that Ms. Jane
Fraser has been announced as the next CEO of Citigroup.
I want to just take a little bit of my time to commend
Citigroup for doing this, but I also want to acknowledge that
this is not the end of the journey, but it is a positive step
forward.
I want to thank Chairwoman Waters because she continues
to--
[Audio interruption.]
Mr. Cleaver. I think, Mr. San Nicolas, you need to mute
your line, please.
Sorry, Mr. Green.
Mr. Green. As I was indicating, I would like to thank
Chairwoman Waters for her efforts to continue us along this
journey of inclusivity and diversity, and thank her for H.R.
8160, the Promoting Diversity and Inclusion in Banking Act,
this one that we just filed. She is the original co-sponsor of
it.
Now, having said that, I would like to thank the staff as
well for all that they do to assist as we move forward. We
couldn't do it without the staff and, quite frankly, I will
never be able to thank them enough as well.
With reference to the issue at hand, on March 27th,
Congress passed the Coronavirus, Relief, Aid, and Economic
Security Act (CARES) Act, which included $150 billion in local
government funding. On April 11th, some 2 weeks later, the
National Governors Association issued a bipartisan statement
calling for Congress to pass $500 billion in additional
assistance. The House of Representatives responded on May 15th,
with H.R. 6800, the HEROES Act, which provided some $915
billion in aid to State and local governments. The House has
responded positively to the request from a bipartisan group of
Governors.
I have a statement in hand from the National Governors
Association that outlines the need for additional and immediate
fiscal assistance to States from this Association. And this
statement bears the name of the National Governors Association
Chair, Maryland Governor Larry Hogan, and the Vice Chair, the
Mayor of New York, Andrew Cuomo.
The statement reads in part--this is an excerpt--that
Congress must appropriate an additional $500 billion
specifically for all States and Territories to meet the States'
budgetary shortfalls that have resulted from this unprecedented
health crisis. It goes on to indicate that in the absence of
unrestricted fiscal support of at least $500 billion from the
Federal Government, States will have to confront the prospect
of significant restrictions or reductions to critically
important services all across this country, hampering public
health, the economic recovery, and in turn, our collective
effort to get people back to work.
I mention this because I want to give some clarity to the
notion that this is something that impacts Democratic Governors
only. That's hardly the case. It impacts all of the States, to
be quite candid, but the evidence of it is this bipartisan
statement.
I would like to enter this statement for the record,
without objection, Mr. Chairman.
Mr. Cleaver. Without objection, it is so ordered.
Mr. Green. Thank you.
I would like to also use a little language that would help
us understand what is meant by layoffs with fire and police.
People will possibly be laid off. It could result in the cuts
that Mr. Cleaver so eloquently addressed earlier. But what this
really means is that homes can be at risk, lives can be at
risk. Firefighters fight fires. We expect them to show up if
there is a fire. Police officers provide protection and
services that we dearly need and want in our communities. We
want them to show up when there is a need.
And I am a person who believes in the police department. I
support police officers. My uncle was a deputy sheriff. That
doesn't mean, of course, that I support some of the ugliness
that I see emanating from some peace officers.
So with this said, I believe that there is a need, and I
trust that it will be met.
I yield back the balance of my time.
Mr. Cleaver. Thank you, Mr. Green.
The Chair now recognizes Mr. Hill from Arkansas for 5
minutes.
Mr. Hill. I thank the chairman.
And I want to thank our Governors for taking time away from
their very busy agendas. I am sure they are looking at their
email during this hearing on all of the problems that they are
faced with. So thank you for taking time away from your States
to provide advice and counsel to us in Congress on how to
properly tailor the remaining needs that we have to fight the
virus and get our economies open.
And, also, I am delighted to hear my friend, Mr. Sherman, a
great accountant and thinker on our committee, say that it is
absolutely the wrong thing to do to raise taxes in the midst of
a recession caused by the coronavirus. That is good advice, and
I hope he provides it to his party's nominee, who has promised
a $4 trillion tax increase.
And, also, let me thank Mr. Sherman, Mr. Cleaver, and Mr.
Green for joining me in exactly the right tone, which is, we
are not for defunding the police at all in this country. We are
for our law and order, men and women who put on uniforms, get
careful training, and the right kinds of policies in our local
cities and governments, and to make sure that we get bad actors
out of our police forces, and not indict the entire universe of
800,000 Americans that work to fight and help keep law and
order and keep our communities safe for our businesses and for
our families. So thank you, my colleagues, for those comments
this morning--or this afternoon now.
I want to begin by providing some background. We tried to
get slides in Webex, and despite our extraordinary staff, we
could not do slides. So, we are going to do an old-school
thing. I am going to hold up a piece of paper to the camera and
talk about it. And what's better than that? You may not be able
to see it. I will submit it for the record so that people will
see it.
In my home State of Arkansas, we are ranked very similar to
New York in terms of COVID cases. However, New York's economy
remained closed for much longer than Arkansas', and it
inhibited their ability to collect sales tax revenue, which I
think is doing our country a terrible disservice. And,
furthermore, I noted, just if you look at the slide, these
States--Arkansas, Texas, New York, and California--all have
about 2,000 cases per hundred thousand in terms of infections,
but look at the difference in revenues: Arkansas, up 14.9
percent, July to July; Texas, up 4 percent; New York, down
almost 9 percent; and California, down a whopping 45 percent.
And it is similar when I look at the income tax data as well.
This is a real challenge to our States, but it is uneven
around the States based on the States' decisions about shutting
down their States based on the nature of the public health
crisis. And that is why the tailoring aspect of this is so
important and not an across-the-board-type request, and for our
Governors the flexibility to spend even the money that you have
now and extend that date from 12/31/2020. And I like Chuck
Grassley's idea of moving it to 90 days after the next fiscal
year-end. I think that is constructive as well.
I also highlight looking at the Treasury's IG, and we have
talked about this today, and in Arkansas, we are about 90
percent obligated on the $1.25 billion, even though I would say
far less than 50 percent of it has been spent. And it is a
moving target, because I am seeing FEMA suddenly reimbursed or
HHS suddenly reimbursed, and now we don't need to spend the
CARES Act money. So, it is been a bit of a moving target for
our Governors as well.
Also, I want it in the record that in addition to that $150
billion that went out to the States, that in a small State like
Arkansas, we got $1.25 billion, then another almost $500
billion was also advanced to the States for healthcare,
education, unemployment assistance and the like. So, to me, it
is really that we have advanced almost $750 billion out to the
States in a variety of buckets. Again, I urge on behalf of our
Governors, flexibility there. And I think that is one of the
most important things we can do.
May I ask each Governor, and we will start with Governor
Kelly, tell me what your rainy day fund balance is today? If
everybody can just give me a number for their State?
Mr. Cleaver. Let's start with Governor Grisham.
Mr. Hill. Thank you, Mr. Chairman.
Governor Grisham. Thank you, Mr. Chairman, and thank you,
Congressman.
New Mexico actually has some interesting titles for both of
our permanent funds, which are set aside. We have one of the
largest reserves that is tied to education and a constitutional
limitation about how they are spent. Although, we did reduce
some set-aside funds for early childhood by $20 million. But
you are probably more interested in our 75 percent reserves,
and we spent, in a special session, about half of that money
already, we and aren't going to have enough now to meet the
billion dollar shortfall. We have $600 million left in that
fund.
Mr. Hill. Thank you, Governor.
Mr. Chairman, with your permission, let me ask each of the
Governors to respond for the record their permanent funds or
rainy day funds, whatever your legislature calls your reserve
capacity for public health, education, and general revenue. And
I thank you, Mr. Chairman.
Governor Walz. From Minnesota, $2.7 billion, 5 percent of
the biennium budget.
Governor Guerrero. For Guam, the legislature removed the 2
percent requirement of a rainy day reserve fund because of the
necessity to use it for our services.
Mr. Hill. Thank you, Mr. Chairman. I yield back.
Mr. Cleaver. Thank you.
The Chair now recognizes himself for 5 minutes.
I will only raise one question that I am very concerned
about, and it is the program that the Federal Reserve developed
to buy $500 billion from State and local governments that are
suffering because of COVID. And on the 17th of June, I sent a
letter to the Chairman of the Federal Reserve and to Treasury
Secretary Mnuchin and requested that they make some adjustments
of the Municipal Liquidity Facility to better assist the States
that are suffering under the budgetary weight of COVID-19. And
I know that for some States, they think it is too expensive to
access the Municipal Liquidity Facility.
But I want to know from the Governors who are still here,
have you used the Facility? And if not, and if it is not
proprietary, if they can share that with us? Because I am
really concerned that we have done something good but that few
Governors are taking advantage of what we thought was a good
idea.
Governor Grisham. Am I still first up, Mr. Chairman?
I will tell you that every tool in the toolbox is important
and valuable, and we appreciate and respect Congress' efforts
to be multidimensional in how we address making sure that
States can be made as whole as possible for economic recovery
and still defeating, to the highest degree, this virus.
New Mexico has four constitutional prohibitions against
going into that, in using a program of this nature. So we
[inaudible] To include us from using this to the potential for
currently or in the future.
Governor Guerrero. For Guam, Mr. Chairman, we are not
eligible because of the population requirement, and even on the
road to [inaudible] To become eligible, but I understand that
there is some reconsideration with that. So the MLF program
would greatly help [inaudible] To provide some kind of
financial help to continue on to providing very basic health,
education, and public safety.
Mr. Cleaver. Thank you.
Governor Walz. Mr. Cleaver, in Minnesota, we have not used
it. It is the cash issue on this. The tools of the Fed, as we
said, they are the last resort. We still have not had to use
it. What I would caution everyone is that I think two things
can be true at the same time. I think much of what has been
said about what has been done and where we are at right now. I
think a lot of the States would be in a much better position if
COVID would disappear today and was gone and there was no
issue. Our issue is the future.
So what I would say is, if we haven't used the program now,
I am certainly glad it is sitting there in the future, in case
we need it.
Mr. Cleaver. I thank all of you for that response.
Governor, here is my concern with this. In the letter that
we sent to Chairman Powell and Secretary Mnuchin, we stated
that 97 percent of the 255 State and local governments that are
eligible, seemingly are locked out of what I thought would be
something that would be used all over, and there would be
something to celebrate. But in the letter, we asked that they
maybe take another look at this and try to figure out ways in
which they can become flexible so that municipalities and
States and Territories could also access these dollars. I am
convinced now that the request we made was in line with what
the Governors here today are saying.
I also would like to take this opportunity to thank all of
you for participating in today's hearing. I apologize for any
of the technical difficulties that made this a little shaky,
but these are difficult and unusual times, and we try to do the
best we can. And I apologize to Mr. San Nicolas as well for the
technical difficulties.
Mr. San Nicolas, maybe you can take it from here?
Mr. San Nicolas. Yes. Mr. Chairman, I am hoping that my
audio is better now.
Mr. Cleaver. It is fabulous. And you look fabulous even
though you are--I guess it is Friday there?
Mr. San Nicolas. Actually, I am in the D.C. area. This is a
testament, actually, to the robustness of the technology we
have on Guam. My Governor, who is on the other side of the
world, is literally having better connections than I am, and I
am just having connectivity issues because of the torrential
rains that we got hit with by surprise. So I am glad that we
were able to find a workaround, Mr. Chairman. And if it pleases
the committee, I will go ahead and proceed with chairing the
remainder of the hearing.
Mr. Cleaver. Okay.
Mr. San Nicolas. [presiding]. Thank you, Mr. Chairman.
And, with that, the Chair now recognizes Mr. Loudermilk for
5 minutes.
Mr. Loudermilk. Thank you, Mr. Chairman. And I thank
everyone for participating today. I was afraid there for a
minute we were about to end the hearing before it was over
with, but I am glad we have a few minutes to continue on.
I am reminded of something that my colleagues on the other
side of the aisle do very well, and it is a quote by President
Obama's former chief of staff, Rahm Emmanuel, who said, ``You
never let a serious crisis go to waste. And what I mean by that
is it's an opportunity to do things you could not do before.''
And I think that is what we are seeing take place here
today. In fact, we have been having this hearing, I won't
continue to opine on some of the things that my other
colleagues have is the jurisdiction of this and just ignoring
rules and going forward. But, anyhow, we are here today, and we
are talking about this issue, which I think we should be
talking about what is working in America that other States can
follow is how to deal with this.
One of the directions I have taken from the very beginning,
and the Governor of the State of Georgia did, is we have to
learn to live with the coronavirus. This isn't something that
is going to be easily defeated. It is a dangerous virus, but it
is here, and it is probably going to be here for some time. We
can't put all of our eggs in the basket of a vaccine. I think
we need to work very hard for a vaccine, but I also think we
need effective treatment.
But we have to learn to continue to operate this country,
and especially our States, with this virus around. And Georgia
has done that very well. Congress has already provided a
trillion dollars of direct and indirect support to State and
local governments. And of the $139 billion of direct relief,
less than a quarter of it has already been spent. Adding
another trillion dollars would be 30 times more than what has
been spent so far.
Now, what has Georgia done? Georgia is actually leading the
way of most States and returning the economy to full strength.
Unlike some of the other States, Georgia is not experiencing a
fiscal crisis. In fact, I have in my hand, Georgia Governor
Brian Kemp's August tax revenues report, which I would like to
submit, without objection, for the record today.
Mr. San Nicolas. Without objection, it is so ordered.
Mr. Loudermilk. Thank you. Georgia's August 2020 net tax
revenues are up 7.7 percent. The tax revenues are greater in
August of 2020 than they were in August of 2019. Why is that?
Because of good governance that was taken, not only during the
crisis, but before the crisis, and especially to get Georgia's
economy rolling again.
The month of August, the tax revenues were up by $135
million. That is almost 8 percent compared to August of last
year. If you remember, the national press and many others
condemned Georgia, and portrayed Georgia's Governor as a
villain when he reopened the State's economy, in their opinion,
too soon. Well, more than a few States would like to be in
Georgia's position right now.
Start with the State's economy, which had a relatively low
jobless rate of 7.6 percent in July. Construction has never
been shut down in Georgia, and schools in much of the State are
open for classroom instruction. The State expected a budget
shortfall of $1 billion for the year, but the actual deficit
was only $210 million. Governor Kemp says the tax revenue is
rebounding, and the State hasn't exhausted its $700 million
reserve fund.
Governor Kemp says he would like Congress to allow him more
flexibility to spend the money left from their first State
rescue, but he does not need another Federal bailout. Contrast
that with Speaker Nancy Pelosi's demand that President Trump
agree to $1 trillion for States and localities. A well-run
State like Georgia doesn't need it, while other States--
Illinois, for example, has asked for tens of billions of
dollars to pay its runaway bills to public unions.
The fact of the matter is that many Governors and mayors
are refusing to open their economies and have mismanaged the
budgets for years, which is why they are in a fiscal crisis,
and Georgia is not. But somehow, it is now Congress'
responsibility to bail them out.
States that are in fiscal crisis should follow Georgia's
lead and end ridiculous lockdowns of millions of healthy
people, and find ways to actually live with the coronavirus,
and allow people to prosper again. That will bring the economy
back and recover the tax revenues.
And if I have time, Dr. Holtz-Eakin, in your testimony, you
talked about how the economic decline is because people are not
comfortable purchasing services that involve in-person contact.
But Georgia has shown that it can make it work with reasonable
precautions. Do you recommend that States do something to
reverse the economic decline?
Mr. Holtz-Eakin. Absolutely. It is the most important
thing. I think the most important, encouraging number we have
seen recently is that in the August employment report, payroll
growth in the United States, hours, workers at work, and total
payroll grew to 20 percent annual rate. That is the tax base
for States and localities. And if we can have that kind of
growth uniform, we will be in far better shape.
Mr. Loudermilk. Thank you. I yield back.
Mr. San Nicolas. Thank you.
The Chair now recognizes Mr. Vargas for 5 minutes.
Mr. Vargas. Thank you very much. I want to thank Chairwoman
Waters for this wonderful hearing. I have to say, I do think it
is in our jurisdiction, and I don't think there is any question
about that. You might not like some of the comments that the
chairwoman made, but I think it is clearly in our jurisdiction.
I also want to thank the ranking member, whom I think
didn't have any problem with the jurisdiction, as I understand
it.
I thought that my very good friend, Mr. Loudermilk--and he
is my good friend, I love him and his family, they are
wonderful people--was going to say that one of the things that
his colleagues on the other side do well is science. Because
the reality is that this is a virus that has been driving all
of this. California has had huge surpluses for the last number
of years until this virus hit. In fact, we have been very well-
run. It is the virus, unfortunately, that has been in charge.
And, in fact, yesterday was a devastating day for, I think,
a lot of us when we found out that the President knew how
deadly this virus was. It has now taken almost 200,000 American
lives. He knew how dangerous it was, and he didn't tell us the
truth. And I also blame Mr. Woodward. If he knew, if he taped
the President, and the President had this great information, he
taped it, he knew it, but he wanted it to come out in his book,
so he didn't tell the American people, I also blame him.
The reality is that the virus has been in charge because we
have had horrible Federal leadership on this. We haven't been
told the truth, and so the virus has been in charge.
Now, who wants to reopen? We all want to reopen. I live in
San Diego, I live in California; of course, we want to reopen.
We want to reopen our State, we want to reopen our economy, but
we want to do it in a sensible way, in a way that is safe. And
we don't think we can unless, again, we have the State fully
participating. We don't want to send our kids back to a school
where they are going to get sick. And that is why the Federal
Government has to be involved.
And the Federal Government is the only entity that can do
this. That is why the Federal Government was created in the
first place. We are under attack by a virus. It happens to be a
virus, not the Soviet Union, not the Russians; it happens to be
a virus. The Federal Government is the only entity that can
step into a breach like this.
Now, I know that people like to throw rocks at States,
saying they are not well-run. The reality is that we have given
more Federal money that we haven't gotten back than all of
these other States that complained that we are being helped in
some unfortunate way. But, anyway, the truth of the matter is,
we need science.
I do want to ask my good friend, if she is still on,
Governor Grisham, if you are still on, there has been this
question of obligated versus spent money. And would you clarify
that for us, because I think that is a big deal. Are you still
here?
Governor Grisham. I am. Congressman, I am still here.
Mr. Vargas. I don't see you, but it's good to hear you.
Governor Grisham. It is good to hear you, too. You and I
have matching hair colors these days from all of the new stress
related to COVID.
But it is a very important question, and I appreciate that
I get a chance to try to answer it again. Take, for example,
New Mexico. Out of the CARES Act or the CRF money, we received
just over a billion dollars. This is how that money was spent
and allocated: $100 million to local governments, except our
largest city and county, in which that money is directly from
the Federal Government; $50 million to small businesses; $28
million to Tribal Governments; and $139 million we have spent
so far on COVID-related expenses, like testing and PPE, which
is still required. We only have an average 7-day supply for
first responders, and now schools are wanting HVAC filtration
systems--and they deserve it--and they need more PPE. And then,
$750 million is set aside to make sure that all other
expenditures and expenses can be met.
But we don't have guidance, clarity, flexibility, or
anything else from the Federal Government on how to do that.
All allocated, much of it directly spent, but without that
clarification, States may be hard-pressed to, if you will, and
this is a technical term, ``get out over our skis'' about what
we can spend and how.
Mr. Vargas. Thank you. I think that clarifies a lot.
Because a lot of people have been saying, well, we have all
this money, it is still out there and no one is spending it.
The difference is, it has all been allocated, but it may not
have been spent, and there are, of course, these technical
issues of, what can you use it for and what can't you? And we
do need to provide more flexibility.
I know my time is running out, but I would have to also
say, thank you. I know that you have sent a number of your
firefighters to our State, the northern part, not to where I
live, but thank you very much.
This is how we should act as a nation, as one, when we have
these problems. We have always helped the nation when we need
it, and it is time for us to act as one, instead of politics.
I yield back. Thank you.
Mr. San Nicolas. Thank you, Mr. Vargas.
The Chair now recognizes Mr. Davidson for 5 minutes.
Mr. Davidson. Thank you, Mr. Chairman. And I thank all of
the Governors and other guests who came as witnesses. And I
thank my colleagues who took the time to participate in this. I
look forward to seeing many of you. It is great to see you even
if only on an image on a screen, but I miss working with many
of you.
And as Mr. Vargas highlighted, there is not one party of
science in America, but I am concerned that sometimes math has
become partisan as well.
And so as we talk about the math behind the spending we
have done, I think it is easy to lose sight of the money. As
the debt has accumulated for our country, it has been done in a
different sort of way. It is not money that is truly borrowed,
because when you borrow money, there is a lender. There is no
lender here; we just print it.
Now, I grant you that some people think that you can print
money, since you have a sovereign currency, and you can do it
in an unconstrained way. I think they actually have a plan to
try to collapse our economy and collapse our currency. The
reality is that when you print money, it inherently destroys
the value of all of the other dollars in existence. And the
idea that we have been able to get away with this so far is a
huge moral hazard.
So before we print more money, about which we are divided
on--frankly, we are divided not entirely on partisan lines, but
we are divided even amongst ourselves in terms of what is the
exact right number. We are divided by State and locality on
what is the right number of additional funds. But there is a
great amount of consensus on the need for flexibility and
clarity on the dollars that were already spent.
Governor Grisham, you highlighted that--if I heard you
correctly--out of the, roughly $1 billion that you had, over
$700 million of those dollars, you would really benefit from,
if you had more flexibility. And that is the same sort of thing
that I heard from my Governor, Governor DeWine of Ohio, and I
heard from my treasurer, and I heard from my State legislators,
and I spoke with all of the local government officials around
my district, whether county commissioners, mayors, school
superintendents, what have you, and they all say, if we had
wider latitude on what we use the funds on, we can put them to
use more swiftly. And then, okay, if you run out of money,
maybe there would be more consensus in terms of whether to
spend more money and on what.
But right now, this money is sitting there in reserve
because the clarity isn't there that so many Governors are
looking for. And so, I introduced back in the early May/June
timeframe, the Flexibility for States and Localities Act, and
it would be great to see that move, because there is really not
a big divide on providing that flexibility. And it would
provide a maximum amount of discretion consistent with Federal
law on how to spend money for States and localities.
So once the State had these funds, they could allocate it
to their counties, to their smaller municipalities, and what
have you. And it wouldn't come with the tight strings attached
that are there today. We have had support, not just from
elected officials, but from the Ohio Township Association and
the Ohio Municipal League and numerous individual government
entities in our district and around our State.
So without objection, I would ask permission to enter those
into the record.
Mr. San Nicolas. Without objection, it is so ordered.
Mr. Davidson. Thank you. Dr. Holtz-Eakin, we created the
Sound Money Caucus recently to deal with the printing of money.
What concerns do you have about the tradeoff of flexibility now
for money that is already in circulation versus the moral
hazard of bigger deficits and more, really not borrowed money
but printed money?
Mr. Holtz-Eakin. Certainly, I think the Federal Reserve has
done a tremendous job of stabilizing the financial markets, but
I think that is the easy part, as we have seen. The exit from
that will prove to be the hard part, and that is, how do you
get out of this without harming financial markets but ensuring
the soundness of money in the future? So, that is going to be
their job.
The thing that concerns me the most about the Federal
budget aspect of this is that we entered the pandemic on an
unsustainable trajectory. Money has been spent, and we have a
higher level of debt, and we will exit it. We will be on an
unsustainable trajectory. There is a lot of fancy theory right
now about how you can have higher debt and it is no big deal
and don't worry about it. But even that theory presumes that
the nation has stabilized instead relative to GDP, and let's
just pick higher or lower.
And we have not done that in the 21st Century. We have not
stopped the unsustainability ever. And that is, for our
country, at a minimum.
Mr. Davidson. Thanks for clarifying. My time has expired.
Thank you, Mr. Chairman, and thanks to everyone who
participated today.
Mr. San Nicolas. Thank you, Mr. Davidson.
The Chair now recognizes Mr. Gottheimer for 5 minutes.
Mr. Gottheimer. Thank you so much, Mr. Chairman, I really
appreciate that, and thank you for the time. And I want to
thank the panelists for being here today.
The COVID-19 pandemic caused a global economic crisis, as
you all know. And as you all are experiencing firsthand, the
pandemic is attacking State budgets from both sides of the
balance sheet as the healthcare and economic response has led
to a significantly higher cost for State Governments, while at
the same time States are facing unrivaled revenue shortfalls.
The Governor here in New Jersey, Governor Murphy, stated
recently that without further Federal assistance, he believed
the State could have to cut half of the State and local
government employees.
I have heard the same deep concern from our mayors across
my district. These cuts, of course, will affect our educators,
our firefighters, our law enforcement, and other first
responders. I know that your States are facing similar
challenges. And it is clear that local governments also are
struggling, as I am sure you know as well, through no fault of
their own, and it could be our cops and our firefighters and
teachers who could pay the price if they are left holding the
bag.
So if I can ask the Governors, starting with Governor Walz,
would you each briefly speak to the economic effect that cuts
in these essential government services will have on your
State's local economy, and whom do you believe will feel the
brunt of these cuts?
And it is good to see you, Governor.
Governor Walz. It is good to see you, Congressman.
And I just want to echo Congressman Davidson. I do, and I--
for many of you, being a member of the Committee for a
Responsible Federal Budget and some of those things, I am
concerned about it. But there is a time when austerity can have
a drawdown too, and I think Representative Gottheimer's point
is that we are going to be left with that.
Now, if you are of the mindset that these employees don't
add anything to the economy, they are not valuable, they are
excess or whatever, that may make sense. But even if you take
that into consideration, they are paying mortgages, they are
paying car payments, they are doing the things that drive the
economy.
Now, I think I can make the case that all of these
employees are providing valuable services. But as I said, we
have very few tools, and what I am most fearful of, is our two
biggest expenditures fall into healthcare and education. And at
a time when those are the two things that are in most need,
those are going to fall obviously most heavily on those least
fortunate, those least able to, and unfortunately, the way our
system is set up, they are going to hit communities of color
much, much harder.
So we are doing everything we can to shield them from that.
We are doing everything we can to think about this. And, again,
this is not a theoretical exercise as a Governor. We are
obligated by law to come up with these things and implement
them. And, again, there is no deficit spending, there is no CR,
either it is there or it is not. And that is what we are up
against.
I just want to say, this talk about more flexibility and
longer time is wonderful. But it is that, plus what goes on
further. We have to maintain our vigilance until this is over,
until the COVID-19 situation is over. If we can't, our
businesses will close, our schools will close, and it gets
worse.
Mr. Gottheimer. Are you facing budget holes because of
this, Governor?
Governor Walz. Yes, $4.7 billion in the biennium, and it
will go further. That is out of about a $50 million biennium
budget. You could start to do the math around that. Many of
those are obligated that we need to. I will say, some of the
work you did around the Medicaid Federal Medical Assistance
Percentage (FMAP) increases are incredibly helpful, and those
target populations are really needed.
I just want to be clear that from a Governor's perspective,
I am grateful for everything you have done, but COVID is not
over, and those bills are coming due.
Mr. Gottheimer. Thank you, Governor, it is great see you.
If I also can turn to Governor Grisham from New Mexico and
ask a similar question as well, of what you are facing and what
you are seeing and what strains that is going to place on your
essential workers?
Governor Grisham. Absolutely. It is nice to see you too,
Congressman.
Mr. Gottheimer. It's good to see you.
Governor Grisham. Governor Walz stole my thunder a little
bit on Medicaid, but, look, we are the infantry, States are, in
dealing with the pandemic. Who do you think is doing the
testing? It is our public health workers. Who do you think is
delivering meals to students and showing up online? It is
educators. Who is it that is also assisting us with containment
strategies and outbreaks and quarantines? It is the National
Guard and our first responders, police officers.
We have already done hiring freezes, reduced our class
sizes for police officers, reduced our budgets by--and just to
give that perspective, I have an additional $2 billion
shortfall going into the next fiscal year. My total operating
budget is just over $7 billion. So, no raises, no investments,
no hiring, reducing costs, asking everyone to take an
additional 5 percent budget cut, yet no investments in
infrastructure or public safety.
We can't keep doing it. We are going to need all of the
above or we aren't investing in our country and we aren't
tackling the virus. And I appreciate the ability--
Mr. Gottheimer. Thank you so much, and I yield back. Thank
you so much, Governors. I really appreciate it.
Mr. San Nicolas. Thank you, Mr. Gottheimer.
The Chair now recognizes Mr. Kustoff for 5 minutes.
Mr. Kustoff. Thank you, Mr. Chairman. And I thank the
witnesses for remaining in the hearing today.
Governor Walz, I have two unrelated questions, and you have
talked several times about the COVID money that you received.
My question really is about the money that you have now. I know
that some of the guidance you have gotten from, or any Governor
has gotten from Treasury may be ambiguous in terms of whether
it is related or not related.
If anybody from the Treasury Department was here today,
what would you ask them in terms of giving you specificity in
terms of what is COVID-related and what is not related? Or
specifically, what do you want to know is related that could be
used for that purpose?
Governor Walz. Thank you, Mr. Kustoff, and I would just
give you a real-world example of this, and it is not ironic,
especially for Mr. San Nicolas, and that is broadband.
Broadband connection impacted it. And we felt like we could
make a direct connection to telemedicine, which is up 14
percent, pioneered by the Mayo Clinic in our district, which
really makes sense, and then education, making sure our
students, no matter where they were, had access to this.
It was hard to get clarification on that, but the one thing
they were very clear about is we had to have the money spent
and obligated, out, done, by December 31st. My State does not
allow me to pay for contracts until the work is done. And it is
those types of things that I think would have been helpful. And
there are examples like that.
I get it, too. I sat in your chair and asked for every
penny that is going--you should have accountability for every
penny that is going, and you better make sure it is being used
for what you asked it to be used for. I think many of you, what
I am hearing is, you want us to use this wisely, you want us to
get it moving, you want things to start again, and we have kind
of been held down. So, I am not critical of Treasury other than
to just say we never got good answers, and we are running out
of time.
Here is the thing. I know you have to work on fiscal and
calendar years. The virus does not work on fiscal and calendar
years, and some open-endedness would really help us.
Mr. Kustoff. Thank you, Governor. This is unrelated, but in
your State, you have a major airline hub operating there, Delta
Airlines. What do you hear from Delta Airlines in terms of when
travel will resume or what do they think their levels will be 6
months or 12 months out, certainly, in Minnesota?
Governor Walz. They are nervous. And you have seen some of
the cuts from the other airlines that projected layoffs and
things. What I hear from them is, and I hear this from people
who travel, and I am here in the State and I have not flown
since March, but they have this down pretty well, they figured
it out. But it goes back to our dilemma again. It doesn't
matter if there is a restriction or a mandate. If people don't
feel safe, they are not going to go back.
And what they are worried about is, if we have all of these
different ideas, about where a plane takes off and where it
lands, as different requirements, masking requirements and all
of that, they just want, I guess what all of us want, and I am
not sure the virus will ever give us--some predictability of
where it is at. So, they are nervous.
But I think for many of you, you are feeling the same way I
am, and my constituents are feeling, that the minute we get
over this, I am flying, especially when we get into January in
Minnesota, I am going to visit Mr. Vargas in California, and I
am going to get out of here. Those are the things that we want
to do. I think they think that it is pent-up.
But I would just close with, I think all of you are
thinking about this, there is going to be a realignment of our
economy. I can't imagine business travel ever resuming to the
point that it was, and we are going to have to think about
that.
Mr. Kustoff. Thank you, Governor.
Dr. Holtz-Eakin, if I can follow up on that, if there is
another package, if there is a consideration, and there will be
for travel, specifically for the airlines, if travel is not
going to return for some period of time, you see different
projections, whether it is 2022, 2023, or whatever, what are
the implications if Congress does approve more money for
airlines for those out 6 to 8 months? And, conversely, what are
the implications for the airlines if we don't approve them?
Mr. Holtz-Eakin. First, I would just note for the record
that Treasury was giving in the CARES Act money for airline
loans, and so far, less than a billion dollars has gone out.
The Treasury's performance continues to mystify me. There is a
clear need the airlines are asking for, and they could step up
and meet it, and I don't know why they are not.
In giving any further assistance to airlines, I think you
have to make the case that they deserve it. They are a critical
part of the supply chain. I don't think this is supporting some
recreation. This is making sure medicines and all the things
that are underneath the basket gets delivered. And you have to
make sure that people only take it if they are going to be
viable. That means loans, not grants, and on generous terms
that allow them to survive.
Mr. Kustoff. Thank you very much.
Thank you. I yield back.
Mr. San Nicolas. Thank you, Mr. Kustoff.
The Chair will now recognize himself for 5 minutes.
I wanted to begin by thanking my Governor for making the
time to join us in this hearing. Again, she literally is on the
other side of the world in our Territory of Guam, an equally
American jurisdiction, and she joined us at 2 a.m., and she has
been with us all the way until almost 3 a.m., Guam time, while
she still has to wake up and manage a pandemic that is, sadly,
growing in scope on our island.
One of the things that I wanted to open with is, first,
acknowledging the fact that this committee's inclusion of Guam
as a member, the inclusion of Guam as a Vice Chair, the
inclusion of diversity and inclusion of the subcommittee, and
inclusion of the Guam Governor in this very critical hearing
has demonstrated, in the most purest of forms, the fact that
this committee is looking out for every American, all across
the country, in all of our Territories, in both hemispheres of
the world. And that is one of the reasons why we are gathering
today to discuss the HEROES Act and to discuss the
circumstances that it would impact, because it absolutely has
jurisdictional basis.
If for no other reason, the fact that providing revenues to
our States and Territories would be critical in order for us to
make sure that their financial circumstances don't deteriorate,
and as such, deteriorate their capacity for debt service, and
deteriorate the capacity to maintain their bond ratings.
And so, I wanted to open really quick with a question to
all of our Governors, to begin with my Governor, Governor
Guerrero, if we don't provide additional funding for the States
and Territories, is there a risk that our bond ratings within
our States and Territories could deteriorate?
Governor Guerrero. Absolutely. There is that risk, because
we have to have the revenues to provide for the service. And
so, if we can get the assistance to also reach us so that we
can bring back our tourism, or even, I think, we should have
some economic diversity, and we have to adapt, and we have to
innovate in terms of what economies can we use and how can we
make sure that we are innovative enough to look at the
resources that we can use. So, it would definitely impact our
credit rating because, of course, what is our capacity and
ability to pay those debt services down?
Mr. San Nicolas. Thank you, Governor.
Could I pose the question also to Governor Grisham?
Governor Grisham. Easy answer, yes. We have worked hard
actually to improve. And we did. We spent 8 years in the former
Administration after the Great Recession. We never climbed out,
in New Mexico. We worked on an austerity basis, our bond
ratings were lowered, and we were working very diligently to
correct that, and we are on our way.
We accomplished pension reform, record highs in our reserve
funds and investments in infrastructure, and all of that is now
stalled as a result of--not the pension reform, that is done--
but that is all stalled because of COVID, and our bond ratings
will, in fact, suffer.
Mr. San Nicolas. Thank you, Governor Grisham.
Governor Walz?
Governor Walz. Yes, absolutely. And I would associate
myself with Governor Grisham. We have worked with the same
types of things and put ourselves in a strong financial
position on our pensions, but this puts it at risk.
Mr. San Nicolas. I thank the Governors for sharing that
very succinctly, because that is a serious implication and a
serious responsibility of this committee. It is absolutely a
jurisdictional issue for us to ensure that we are providing the
capital necessary during these pandemic times for our States
and Territories to not be suffering needlessly, credit rating
damage and potentially even debt service risks as a result of
these pandemic revenue circumstances.
And I would like to just highlight that for my colleagues
as we consider these discussions. Because as our Governors are
faced with difficult choices of whether to fund health,
education, public safety, service, debt, and et cetera, the
bond rating agencies are going to be looking at the revenue
circumstances and adjusting their risk profiles accordingly.
And that would not only have an impact on the ability for our
States and Territories to go out and secure capital on an
ongoing basis, but it would also provide circumstances where
their long-term prospects will be adversely affected because of
these credit impacts.
And so as the Financial Services Committee, we have a
responsibility to our States and Territories to be able to
provide them with the capital facilities they need in order to
make sure that we do not have these kinds of credit impacts.
I want to close with thanking the Governors for joining us
here today. And I wanted to again thank my Governor, Governor
Guerrero, for her participation and for staying with us during
this early morning hour in her constituency.
I now recognize the gentleman from Ohio, Representative
Gonzalez for 5 minutes.
Mr. Gonzalez of Ohio. Thank you, Mr. Chairman. And thank
you to our Governors and to Dr. Holtz-Eakin for being on today.
First, I want to echo my thanks to Governor Guerrero for
being on at such an early hour today, and I appreciate your
testimony. We are going to join in that initiative to try to
help at the Fed level with respect to accessing that Treasury
Facility because I think it is important for you all. And,
frankly, I see no reason why you shouldn't have access to it.
So, I appreciate your testimony on that.
I want to try to get a sense again of what the right toggle
is for the aid. Because I am somebody who believes that we
probably do need to provide additional support, but I want to
make sure that it is right-sized. I want to start first with a
question to Dr. Holtz-Eakin. And you said this with Mr.
McHenry's questions, but I just want you to say it again.
Budgets at the State level should track what is happening
in the broader economy, correct? So if the economy--
directionally. It is not going to be exact. But if the economy
drops by 3 percent, you should expect similar declines on the
budgets. Is that fair?
Mr. Holtz-Eakin. You expect revenues to go down. And my
only point is this is a little bit different.
Mr. Gonzalez of Ohio. Right. A little bit different, but
directionally, it is going to be accurate, right?
I am going to start with Governor Walz, then, and also
Governor Grisham, eventually. For Fiscal Year 2019--and my
staff looked this up, so correct me if I am wrong--the budget
for the State of Minnesota was roughly $23 billion?
Governor Walz. Yes, that is correct. We are roughly now at
about $48 billion for the biennium.
Mr. Gonzalez of Ohio. Okay. And then in terms of CARES Act
dollars or aid so far, $2.18 billion has been allocated to the
State. Now, granted, that is for Fiscal Year 2020. But if I
just use the 2019 number, that is 9 percent, roughly, of what
you lost.
Governor Walz. Congressman, if I could, we moved 45 percent
of that $841 million to local, because the way the State works
is we manage public health, and the counties implement it. So
of that, that did not come out of my budget, it moved down to
the local.
Mr. Gonzalez of Ohio. That was $800 million, you said?
Governor Walz. $841 million out of that total that you
gave, that we received, we moved to local.
Mr. Gonzalez of Ohio. Okay. So, probably 6 percent,
roughly, stayed at the State level?
Governor Walz. That is correct.
Mr. Gonzalez of Ohio. Okay. So, I guess I will just start
there. Do you expect the economy to drop year over year 6
percent, Dr. Holtz-Eakin, is that an expectation?
Mr. Holtz-Eakin. That is a bigger drop than most people
expect. CBO has it at about 4 percent year over year.
Governor Walz. We don't expect it, but we also have the
added expense that we did not factor into our budget of
fighting COVID.
Mr. Gonzalez of Ohio. That's fair.
Governor Grisham, same line of questioning. I have roughly
$7 billion in Fiscal Year 2019 for the State's budget, and
$1.25 billion has been allocated. I don't know how much has
gone local, but that is actually 17.7 percent. Pretty sizable.
Again, it feels like it should be enough. I'm just being
honest, but maybe walk me through why it is not?
Governor Grisham. Thank you. And I really appreciate that,
Governor Walz. States do operate their public health systems
completely differently. We are a centralized public health
system, so everything happens at the State level. It is our
responsibility for all of those deliverables and the direct
services related to COVID.
We actually got $1.67 billion, so $1 billion, and it got
allocated in the following way: $100 million to local
governments; $50 million to small businesses; and $28 million
to Tribal Governments. So, $139 million is what we have
expended so far, without having clarity from the Federal
Government.
Mr. Gonzalez of Ohio. If I could reclaim my time briefly,
because we are running low, I appreciate that.
Do you see where I am coming from, though? We are giving
17.7 percent of the full budget to your State, and we are
expecting a 4 percent decline in GDP. And, again, I want to
help. I am somebody whom you would find would be willing to
chip in here for sure, but it is hard, frankly, to wrap my head
around, certainly, the trillion-dollar number that Speaker
Pelosi has thrown out. I can't imagine how you would come up
with that.
But my time is up, so I yield back. Thank you.
Mr. San Nicolas. The Chair will now recognize, Mr. Lawson
for 5 minutes.
Mr. Lawson. Okay. Thank you.
And I want to welcome all of the Governors from the States
and Territories to this hearing. And I thank Chairwoman Waters
and Ranking Member McHenry for hosting this hearing today.
I thank all of the members of this committee, and I welcome
my two colleagues back to the House. It is wonderful to see you
all here.
Landlords across this country have been providing housing
for renters, even though many renters have been unable to pay
the rent. And that is significant. The U.S. Census Bureau
reported that from July the 16th to July the 21st, about a
third of adults in Florida were struggling to cover July's
rent, and were expected to have trouble paying August and
September rent. However, access to stable housing is vital,
especially during this pandemic, and yet we have done little so
far to support landlords.
The HEROES Act included $100 billion in Emergency Rental
Assistance that would be paid directly to landlords once
tenants qualified for assistance. Can each of you talk about
what you are hearing from small mom-and-pop landlords in your
State and why the Emergency Rental Assistance is critical?
Governor Grisham. Congressman, I will jump in. We are
woefully ill-prepared here without additional support to deal
with those small businesses and individual protections for
mortgages and rental assistance. And given that New Mexico has
the highest per capita women-of-color-owned businesses, we also
know that women-owned businesses and women of color have far
less equity built up in their businesses and far less access to
credit. Their ability to continue to negotiate with landlords,
who also are paying mortgages on large properties, that the
trickle effect here means that they are going into further
debt. Providing non-grant relief to them for mortgage
assistance doesn't quite work. And not having that small
business arm in our State means that we have slower economic
recovery and much larger gaps in our ability to meet basic
needs.
So, we are hearing an earful from local businesses,
independent business owners, small businesses across-the-board
about how they are at that cliff. And the money we have
provided so far is insufficient for them, particularly going
through the end of the current--because we are at the
beginning, all the way through the end of this current fiscal
year.
Mr. Lawson. Okay. Governor Walz?
Governor Walz. It's good to see you, Congressman Lawson.
And I just really appreciate this committee. And I want to
echo--I think Congressman Gonzalez's questions are very fair to
ask us what we are doing with the money, how we are spending
it.
One of the things I can tell you is, again,
philosophically, I guess you can have a difference, but we
asked people to stay home to protect public health. That
started to create a cascade of things when they couldn't pay
for their rent, they couldn't move forward, landlords couldn't
pay. I guess I would answer and tell you we are extremely
worried to put $100 million in Minnesota into rental
assistance.
I would be interested to hear, and, again, it is your time,
Mr. Lawson, but we have an economist, we have someone who
understands us here, with Dr. Holtz-Eakin. I am fearing the
cliff that is coming where some of these things are going to
come due. And they may not look like they are in a State
budget, but what happens when 27 percent of renters aren't able
to pay back rent come the end of the year, and how do we
address that? And how does the market, if you don't believe
that the support that we are getting or the help that we are
putting in is the way to go, how will that work itself out,
because I am worried about it?
Congressman, it is an issue that is impacting us, and we
are worried.
Mr. Lawson. Okay. Thanks.
Governor Kelly?
Mr. San Nicolas. Oh, the Governor of Kansas is no longer
joining us, Mr. Lawson. We can move on to Governor Guerrero.
Mr. Lawson. Okay.
Governor Guerrero. Definitely, assistance to the small
businesses and renters' and homeowners' assistance is going to
go a long way on our island.
We are a very fragile island. Our revenues are very
limited, and, of course, our economy is very sensitive to
tourism. So, I am worried about an increase in homelessness. I
am also very concerned about an increase in businesses being
shut down, which is going to definitely affect our economy.
Mr. Lawson. Okay. Thank you.
Mr. San Nicolas. Thank you, Mr. Lawson.
The Chair now recognizes Mr. Steil for 5 minutes.
Mr. Steil. Thank you very much, Mr. Chairman. I appreciate
you recognizing me.
But I have to say, we are here again, using valuable
committee time to debate bills that aren't going to become law,
and discuss ideas that don't have jurisdiction in this
committee, and that aren't connected to reality.
Let's think about where we started on this. Congress
provided $765 billion through the CARES Act to support State
and local governments. That included funding for schools, for
hospitals, unemployment benefits, transit, and other critical
programs.
CARES gave $150 billion directly to States and large
municipalities through the Coronavirus Relief Fund (CRF).
Recipients had broad discretion on how they could spend CRF
resources. Like many of my colleagues, I supported the cash
infusion and hoped to get State and local governments the
resources they needed, provided we could get the money out the
door quickly and meet the urgent need.
Months later--we are months later now--billions and
billions of dollars of this has remained unspent. It would be a
worthwhile time to sit down in this committee hearing and
figure out why that money, by so many States, hasn't been spent
to help people in need.
But, instead, we are talking about more money. So, let's
dive in.
According to the Department of the Treasury Inspector
General's report released earlier this summer, at the end of
Q2--we are now in quarter three. But in Q2, let me give you a
few examples: Illinois spent 14.4 percent of its money, of the
CRF resources; Michigan, 3 percent; New Jersey, 2.1 percent;
and Wisconsin, my home State, had only actually spent 3.8
percent of the money.
Some of these States will point out that they have
allocated more of their CRF money to different purposes, even
if those funds are left in the bank account. But simply
earmarking the money doesn't put the money to work for the
hardworking men and women who have needed relief. It doesn't
buy PPE, to earmark it. It doesn't treat addiction and mental
illness, to earmark it. And it didn't get our kids back to
school safely, which is so absolutely critical when you look at
States like Wisconsin that have only spent 3.8 percent at the
end of Q2, and our State doesn't give us an update as to where
those additional funds are.
Now, we have been told that State and local governments are
in crisis and billions of dollars are needed, no questions
asked. But we need to ask the hard question: If the situation
is so urgent, why hasn't the money been spent? Where are
States' rainy day funds for moments just like this? And how
much State tax revenue has actually gone down?
I will give you an example. In my home State of Wisconsin,
tax collection has gone up this fiscal year and only slightly
missed pre-coronavirus projections. And I think, in large part
thanks to the high-quality work of former Governor Scott Walker
keeping money in the bank and giving us a cushion to navigate
our way through this pandemic, Wisconsin did it the right way.
My colleagues want to send another trillion dollars to
State and local governments to spend on pretty much anything
they want. That means supporters of H.R. 6800 are asking
constituents and folks here, hardworking folks in the State of
Wisconsin, to pay for fiscal mismanagement of States like
Illinois, that is a complete fiscal disaster. I am adamant, and
I have been from the beginning, that Wisconsinites shouldn't
pay for irresponsible decisions made by our neighbors to the
south.
I want to emphasize that I am not going against providing
additional assistance in a targeted manner. But this broad-
brush approach that we have done, where the funds to States
like Wisconsin haven't even been spent, needs to be called into
question. And we should be spending our time in the committee
asking those tough questions, rather than just having a
conversation of how we send additional money to States without
asking any of these States to make some of the hard fiscal
decisions that are so desperately needed, in particular, like
the States to our south, Illinois. Where I sit in Wisconsin,
overall, we have done a pretty darned good job.
That is why I introduced legislation to provide State and
local governments with grants, in particular, to address the
rise in addiction, in mental health needs, and challenges that
are associated with the coronavirus. We need specific, targeted
relief, not this broad-brushstroke, trillion-dollar approach
that we see time and again discussed here in this committee.
But we can't use a trillion-dollar blank check, especially
when the facts don't match the story that we are being told. We
have to do better. This committee needs to remain focused and
disciplined. I find this committee hearing incredibly
unproductive, when we should be discussing something far more
relevant, where we are diving into the facts, instead of the
broad brushstrokes that we are seeing here today.
And I yield back. Thank you.
Mr. San Nicolas. The Chair now recognizes Congresswoman
Tlaib for 5 minutes.
Ms. Tlaib. Thank you, Mr. Chairman.
As a person who comes from a City, Detroit, that made
history with the largest municipal bankruptcy in the nation, I
can tell you that making sure that our local governments can
pay their pension responsibilities, and making sure they can
provide for their residents and show up for their residents, I
think, is a very critical issue for our nation.
I actually think that if folks look at the billions of
dollars--I believe it is close to $300 billion--that we used to
bail out millionaires and billionaires--let's look it up--in
the CARES Act, I wish we could actually pull some of those
corporations and those millionaires and billionaires before
this committee and ask them, what did they spend the money on,
where is it going? Because the one thing that I like is, when
we expend this money to our local and State Governments, it
remains in the public's hands. It is transparent. We know
exactly where it is going.
The late mayor, Coleman Young, Mayor of the City of
Detroit, said that, ``When the nation gets a cold, Detroit gets
pneumonia.'' And that has sadly held true even during this
COVID pandemic.
Many of us, all of us, have heard from frontline
communities and organizations that work within a lot of our
cities, but many of them are very small. And some of them are
challenged districts, like Chairman San Nicolas' district,
which is really one of the hardest-hit ones.
But one of the things during this crisis--when I look at
numbers of close to 1,500 Detroiters, especially, who died of
COVID, when I look at the thousands, close to 15,000 folks
within my community who got COVID, I know that a lot of the
reliance on stopping the spread of COVID lays on the State and
local governments, always. Not Congress, not the Federal
Government. It is the State and local governments that are on
the front lines.
For many of the Governors who don't know, I have pushed
very, very strongly that the Federal Reserve not only offer
support for State and local governments, but adjust their
lending facility to make the program more approachable for
States to use.
However, the Federal Reserve is kind of undermining the
impact of the one thing that the Federal Reserve has directly
in its power, which is dealing with the Municipal Liquidity
Facility--I always say, ``MLF'' program. And I know somebody
had mentioned it earlier in the committee hearing, but that
functionality excludes about 97 percent of States.
This is the same Federal Reserve that easily bailed out
banks, did it swiftly, with a sense of urgency, and was
flexible, and all these kinds of things. But we are not doing
the same for States, cities, and counties, which I truly
believe would have been a tremendous help and lift for the City
of Detroit, which left--so many of our City employees who
worked for us for decades lost so much of their pension because
of the bankruptcy.
So, my question is, as Dr. Holtz-Eakin has mentioned that
the program is really being underutilized, would each of the
Governors comment on whether you looked at using the Municipal
Liquidity Facility? If you have, how has it affected your
assessment? What are your assessments of whether or not we need
to be changing it, whether or not you think that is something
that, again, could be reformed or modified so that it could be
accessible to all of you?
And I can start with--I think it is Governor Walz who seems
to be very popular among my colleagues. I didn't get to serve
with you, but you can go first.
Governor Walz. Thank you, Congresswoman. You must not be
talking to as many as you should.
Before I answer, I would like to ask Chairman San Nicolas
if I could submit for the record our expenditures for the State
of Minnesota.
Mr. San Nicolas. Without objection, it is so ordered.
Governor Walz. Mr. Steil said that he doesn't know where it
is being spent or the percentage or whatever. I can show him
where every dollar is going, how it is being expended. And 92
percent of that is obligated and out there.
I think that is an important question. I don't know how
many times I am going to continue to answer this--
Ms. Tlaib. Yes. And, Governor, just as a person who--I know
I am pretty new to Congress. Please know that the money is in
the public's hands. It is transparent. You have to go through a
process even on the State level for that. We know where the
money is going.
We don't know where the billions of dollars--we spent more
money for billionaires and millionaires than even on the
stimulus payment that we gave for our neighbors across the
nation.
I know you are going to submit it for the record, but I
would really like to talk more about my questions instead of
the speech that was given by my colleague.
Governor Walz. Here is what I would say on the MLF,
Congresswoman, a short-term borrowing tool on cash-flow issues.
At this time, we don't have a cash-flow issue. And I think many
of you--they are not that different in this conversation. We
are not that far off, unless you believe we shouldn't be
addressing COVID at all, unless you believe it is over. If you
do think those things are there, there is some room in there.
But the MLF, I think, at some point, and depending on the
entities, would be a useful tool for us. It simply doesn't work
because the cash-flow issue is not where we are at.
Ms. Tlaib. And I think I ran out of time, Mr. Chairman?
Mr. San Nicolas. Unfortunately, you have, Congresswoman
Tlaib.
Ms. Tlaib. Okay. I will submit these questions to all of
the Governors.
But I really do want to talk about this, even beyond the
overflow, to all the Governors. I think even to carry the debt
so that you can effectively respond to COVID is critically
important. Even just to hold it for a certain amount of years
would be very effective.
Thank you so much, Mr. Chairman. I yield back.
Mr. San Nicolas. Thank you, Congresswoman Tlaib.
The witnesses are advised, the panelists, the Governors,
that they may submit written testimony in response to any
questions that were posed by any Members, and also to transmit
any documentation they feel is relevant to the nature of the
conversations.
The Chair now recognizes Congresswoman Axne for 5 minutes.
Mrs. Axne. Thank you, Mr. Chairman.
And thank you to all of the witnesses for being here today.
This is a very important topic, so I appreciate you taking the
time.
As somebody who spent a decade in State Government here
under both Democratic and Republican Administrations, I know
how important this is. And certainly some of the comments that
I have heard today and I have heard in the past of why people
don't want to support State and local funding, really don't sit
well with me.
Every State in this great nation of ours has some type of
balanced-budget requirement, and so do the municipalities
within those States. So, there is a requirement on almost every
part of this country where there is a balanced budget. There
are not people out there spending willy-nilly, trying to limit
opportunity for their constituents by not keeping a good budget
in place.
So, from somebody who has been there, who worked on the
Reinvestment and Recovery Act funding under President Obama, I
certainly know how important it is to support our State and
local municipalities.
Governor Walz, it is great to see somebody right next-door
to me here on this hearing, so I think I am going to start with
you.
Just for a little background, I know Congress provided $150
billion to States in the CARES Act to cover these increased
costs, and that has been helpful. I think you mentioned that
earlier. But isn't it true that the bigger problem for your
budget right now is loss in revenue?
Governor Walz. Congresswoman, thank you. Yes, the answer is
that is correct.
And I heard Dr. Holtz-Eakin, and I certainly hope his
projections are right, that if we get a rebound--and we are
starting to see at least some encouraging numbers, if they
start to come back--that doesn't do us any good in the present.
Because those revenues have dropped off during those quarters
we had, and we have to make our budgets balanced. As you said,
we are obligated constitutionally. So, that is the biggest
problem.
I think the questions are very valid in here. Where are you
spending it? How are you spending it? But, as you said, if you
have worked in local government, you get how this works. So,
that is the problem right now.
Mrs. Axne. Okay. Thank you so much for that.
And, listen, you talked about local governments. This is
even more exacerbated, I think, for so many of our
municipalities. I am in the Des Moines area, for example. We
are estimating losing $10 million a month. That has been since
we first started out with this. It is $10 million a month. So,
this is going to be a huge expense for a City that doesn't have
the opportunity to shore up these revenues.
And then, in talking to my small-town mayors, they are
trying to figure out how they are going to shore up funding for
a million-dollar hole that has been created, which is a heck of
a lot when you think about some of the small, rural towns in
this country.
And then, meanwhile, in Iowa, unfortunately, a few weeks
ago, we just had the derecho, which was an extreme storm that
went through our State. Our cities are really trying to figure
out how they are going to make sure that we put people right
again after that with their hands literally tied behind their
backs right now because of the expenses related to COVID.
So life goes on, and these municipalities in our State
still have these revenues that they need to shore up and take
care of many other issues on top of COVID.
Governor Walz, I know you have been trying to hold off on
making actual budget cuts for a long time, but could you kind
of just walk us through what some of those key cuts might look
like for your State, if you had to do this?
Governor Walz. Congresswoman, yes. I have asked my agencies
to start preparing, and it has to be across the whole spectrum.
It needs to be budget reductions, and then I have asked them to
look at revenues. But I share the economic belief that it is
very hard to ask for revenue increases at a time when you have
an economic downturn.
With that being said, it is very hard for me--like, to
balance my budget--and some people think, well, just get rid of
State Government. If I eliminated the entirety of State
Government, that is about 10 percent. So what that means is
that we are having to look hard at those places that are the
most impactful. And the biggest part of our budget by far is
healthcare and education, especially K-12. And, at a time when
we know our students need to get caught back up, and we need to
be innovative, that is what is becoming very challenging.
And I agree with everybody; we are all trying to find
creative ways to deal with this. But there is just the
necessity of this, that for a State to be able to balance their
budget with this severe of a downturn, it is going to be very
heavily dependent on those cuts to the most important things
that I would argue lead to growth in the future.
And so that is why we are--and, again, this is different,
because we asked people to stay home to protect public health.
And the only entity that can help is the Federal Government in
this case, unless we choose to collapse our education system or
collapse our healthcare system at a time when we don't believe
that is the right way to go.
We have not made those decisions yet, but when you look at
all of the different scenarios, there is not a really good one.
Mrs. Axne. Thank you for that.
And we now have economists estimating that we stand to lose
about 4 or 5 million jobs if we don't provide that support,
which takes me back. I want to return to the recovery from the
global financial crisis that we have had in the past. I think
it is very important here. We all knew that was a painfully
slow recovery.
And, as I mentioned, I was a part of that in our State
Government here. It is pretty well-established by economists,
including the International Monetary Fund, that job losses at
State and local governments was a key issue for the recession
and the difficulty in coming back.
Governor Grisham, it is good to see you. I think, during
that time, you were just becoming a county commissioner, having
left a State role, when we were recovering from the last
recession. Is that correct? About a decade ago?
Is she on?
Well, she may not be on.
I wanted to touch base with the Governor because, as I
mentioned, having been a part of that recovery process, it was
very difficult in determining what the States were planning on
doing to make sure that they could meet those economic issues
that they were facing. And we had very difficult issues here in
Iowa, and I hope to not see it again.
I want to just close by saying, this is such an important
subject, and I am so glad that you are all here. It is why I
have set forth a bipartisan bill now almost 5 months ago to
make up for the lost revenues at State and local levels.
And we need to get this done to ensure that those essential
services that are provided, that the Governor just mentioned,
continue to flow so that we can educate our kids and keep our
economies moving and also protect the health of our
constituents.
Thanks so much.
Mr. San Nicolas. Thank you, Congresswoman Axne.
The Chair now recognizes Congressman Budd for 5 minutes.
Mr. Budd. I thank the Chair.
Dr. Holtz-Eakin, it is good to see you again. Thanks for
being on. And my former colleague, Governor Walz, as well.
Dr. Holtz-Eakin, collectively, the States and localities,
either directly or indirectly, have been the recipients of
about a trillion dollars in relief funding, and still today
only 25 percent of those funds have been used by the State and
local governments.
The situation doesn't appear to be a funding problem but
more of a flexibility issue. And that is why I introduced,
along with a friend and colleague, Warren Davidson, H.R. 7094,
the Flexibility for States and Localities Act. The bill gives
States greater discretion over how to spend funds allocated to
them by the Federal Government.
So, in your opinion, what are some additional steps we
should be taking to make it easier for States and localities to
utilize these funds?
Mr. Holtz-Eakin. I think there are legislative provisions--
you know more about that than I do, and I thank you for your
efforts on that front.
There is also the administrative end of this that is coming
from the agencies. The money has to flow through Federal
agencies. That is not always a smooth process, and that is
often where a lot of the ambiguities come in, where rulemaking
takes the place--for Treasury, for example, with an FAQ, and
the FAQ gets updated, and now you have two pieces of direction,
and pretty soon there is a lot of confusion on the ground.
And I think probably the biggest quick improvement would be
to clarify the agencies' roles in getting the rulemaking and
guidance cleaned up. And that would help a lot.
Mr. Budd. Thank you.
Again, back to you. In my own State of North Carolina,
about 9 percent of the federally-allocated funds have been
used. And according to the National League of Cities, 32 States
are withholding funds from their local governments. North
Carolina is providing funding to county governments but
excluding city and local governments.
Are these some of the reasons that the majority of
federally-allocated funds are going untouched?
Mr. Holtz-Eakin. Presumably. It is not an economically
rational thing. There must be some sort of administrative
reason for these decisions.
But the CARES Act was designed with speed as the paramount
issue. The economy was falling at an extraordinary rate. The
Federal Government stepped in, and Congress provided an
extraordinary amount of taxpayer backing to try to get in there
quickly and stop that fall.
It is frustrating to see, in many ways, that it didn't
happen with the speed that was intended. And finding out why is
important.
Mr. Budd. Thank you.
And the third question--this one is actually multipart--to
Dr. Holtz-Eakin again: What is the best way to support State
and local governments? Is it through another Federal bailout
that we are considering?
Mr. Holtz-Eakin. I will go back to the nuts and bolts of
this. You cannot do anything better than to get the economy
going again and getting the tax bases growing again. That is
the lifeblood of those funding streams.
And people often harken back to the Great Recession, but if
you look at the data for the country as a whole, States and
localities did not lay anyone off for the first 2 years. The
layoffs came late. And it was due to the fact that there was
very poor recovery and very slow recovery and those tax bases
did not grow the way they were anticipated to and should have.
That means that what is happening right now is of paramount
importance: getting the economy back to as high a level as
possible quickly, so that you don't leave that legacy for the
States and localities a second time around.
Mr. Budd. The other part of the question is, what is the
best way to support low- and moderate-income workers?
Mr. Holtz-Eakin. I think the best way for those who have a
job is to enhance the return to work. We have an earned income
tax credit. If it is viewed that greater support is needed,
that is the vehicle. Reward work wherever possible. And for
those out of work, overall economic growth is the fastest way
to get people back into jobs.
There will be, I think, a class of workers who will be the
subject of a big restructuring in this economy. It won't look
the same in the years to come as it does right now. And finding
the skills and the opportunities to get those jobs is something
that is worth thinking hard about in this moment.
Mr. Budd. Good. Thank you.
Can we help these low- and moderate-income workers through
helping businesses?
Mr. Holtz-Eakin. Yes.
Mr. Budd. Like, small businesses in particular?
Mr. Holtz-Eakin. That was the PPP. It wasn't that we loved
businesses. It was that that was the best check-writing machine
in the world, the payroll function. And so, give it to the
business, keep that economic infrastructure in place, and make
sure the workers got their regular paycheck, and can support
their families. That was a good design.
And I know there is a lot of Monday-morning quarterbacking
on that, but I really think the $500 billion that went out for
a month in the PPP was one of the great accomplishments in
fighting this downturn.
Mr. Budd. Thank you. I yield back.
Mr. San Nicolas. Thank you, Mr. Budd.
As an advisory to Members, Governor Grisham is no longer
able to continue with us. That is just an advisory to all
participating Members.
At this time, the Chair would like to recognize
Congresswoman Porter for 5 minutes.
Ms. Porter. Thank you very much.
Governor Walz, thank you so much for joining us. I know
Minnesota and so many States are facing the same challenges as
California. Everyone is being forced to make difficult
decisions. And our families, including our kids, are bearing
the brunt of it.
But we really don't have to.
Governor, I am sure you are familiar with the IDEA, but for
the folks at home, the Individuals with Disabilities Education
Act (IDEA), is the Federal law that requires schools to provide
services to children with disabilities, sometimes called
learning differences.
The Federal Government, as you know, splits this funding
with the States. When the IDEA was passed, the Federal
Government promised to fund 40 percent. Yet, the closest we
have gotten was 13.8 percent.
So I am going to be like my third grade daughter with
homework, and what I think we can definitely say is that 13.8
percent is not equal to 40 percent, leaving our States with a
big shortfall.
In California last year, we underfunded this program by
about $22 billion.
Has Minnesota ever gotten full funding from the Federal
Government for the IDEA?
Governor Walz. We have not.
Ms. Porter. Would it help you if you did?
Governor Walz. It certainly would. I can say that part of
the Recovery Act of 2009 was taking up IDEA funding above 20
percent. It had a long-term impact both in terms of economic,
as well as student learning.
Ms. Porter. Okay.
So, last year, we underfunded kids with special needs by
$22 billion.
Do you know, Governor Walz, how much money in fees
Secretary Mnuchin negotiated for the big banks for processing
no-risk PPP loans?
Governor Walz. I do not.
Ms. Porter. That is okay. I do. The big banks got $18
billion for processing PPP loans--almost enough to have covered
the cost of fully funding the IDEA.
Let's look at another example. Do you know how much was set
aside in the HEROES Act to deliver in K-12 schools to have
instruction, purchasing technology, teacher training, and
maintaining school personnel? Do you know how much the House
allocated in the HEROES Act, which the Senate has not--
Governor Walz. We do. And it is substantial.
Ms. Porter. It is a big number, isn't it, $58 billion. But
you don't have that money, do you?
Governor Walz. We do not.
Ms. Porter. And do you happen to know how much we allocated
for the airlines during coronavirus relief?
Governor Walz. I do not have the total.
Ms. Porter. Well, guess what? It just happens to be $58
billion, $17 billion of which went to defense contractors, like
Lockheed Martin, whose profits are at an all-time high. And the
Senate won't even vote on the HEROES Act to give our kids that
$58 billion.
Do you know how much we spend nationally on salaries,
wages, and benefits for school employees in a year?
Governor Walz. I do not know the total.
Ms. Porter. Okay. It is about $511 billion. That is what we
spend to fund all of our schools.
Do you know how much Secretary Mnuchin negotiated in
financial relief for corporate America?
Governor Walz. Well, if I had to guess, I would say $511
billion, but I do not know.
Ms. Porter. Pretty close: $500 billion. You are really good
at this, Governor Walz, $500 billion. And yet, they have only
used a little over 15 percent of that money.
When it comes to our kids, though, and our special needs
kids, apparently, we are out of touch.
Governor Walz, with State budget cuts, how much could your
schools potentially lose this year?
Governor Walz. It is a substantial amount. As I said, we
don't have a lot of places to turn to. It is healthcare and
education.
Ms. Porter. And, without the support, can you just stop
paying for teaching?
Governor Walz. Well, you could, but the implications of
that are dramatic, in terms of your long-term sustainability as
well as the ethical issues.
Ms. Porter. And, under Federal law, can you just stop
educating children with disabilities?
Governor Walz. You cannot. We are obligated to fully do our
best and maintain that effort.
Ms. Porter. Even though the Federal Government has not
fully funded its promised 40 percent of the cost?
Governor Walz. No.
Ms. Porter. This issue is personal for me. You wouldn't
know it from how much I love to talk now in these hearings, but
without my speech therapist--I spent 5 years in speech therapy
in elementary school, and I know how important those services
are to allowing kids to fulfill their potential.
We have the cash to educate all children, including
children with disabilities. And I hope we step up and deliver
that relief to Minnesota and other States, including
California.
Thank you. I yield back.
Mr. San Nicolas. Thank you, Congresswoman Porter.
The Chair now recognizes Congressman Casten for 5 minutes.
Mr. Casten. Thank you very much. It's a pleasure to see you
all.
Governor Walz, I am going to--I had all sorts of homework
that I had done for Governor Grisham, so, unfortunately, I am
going to have to try to fake it with you. But I wonder if you
could just put some numbers to some of the stuff we have just
been talking about?
What was the added cost that your State had just specific
to COVID? Could you estimate how much of a hole did COVID
specifically put in your budget, before you get into revenue
loss?
Governor Walz. Yes. Right in the beginning, we put $550
million in just to fight COVID. The budget hole it is blowing--
we had a $1.5 billion surplus coming in, in the next year. That
turned into a $2.5 billion deficit. And our biennium deficit is
4.7 now, and my guess is it will grow bigger than that. So, our
revenue dropped off about $8.1 billion.
Mr. Casten. So, $8.1 billion in revenue drop versus $500
billion in added. So it is a factor of, what is that, 16
difference between your revenue loss and your higher costs?
And in the CARES Act--and, of course, we have covered the
COVID costs--were you able to recoup most of those higher costs
from COVID? Did we match it relatively well?
Governor Walz. We received $2 billion, roughly, from that.
We put out about a billion of that, and it went directly either
to our largest two counties, cities, and then 841 to the
localities. So, we got about a billion out of that.
Mr. Casten. Okay. So if we don't pass HEROES, you will have
a big hole?
Governor Walz. Well, it was added expense.
And I know this is your time. I would just like to--just
quickly, Mr. Casten, when people ask about this spending and
why it is not spent out, counties are managing this. We had
counties that had zero cases--and the Representative from Iowa
will understand this--and then, all of a sudden, we rocketed
into the top 10 counties in the nation because of our poultry
and our protein processing plants. Those counties went from
having no expenses to expenses that were bigger than their
entire budgets.
And so, one of the things is the unpredictability. And that
is what we are having as a State. I have to maintain my testing
regimen, as far as I know, for the next 12 to 18 months, and
that is at $177 million. So, that is one of our problems.
Mr. Casten. No, I get it. And, look, thank you for doing
it, and I apologize that you have had to. When our President
decided to let States lead, this is what happens when you have
no leadership from the top. I apologize for it.
You have said a couple of times that healthcare and
education is the bulk of your budget. On a percentage basis,
about how big is it?
Governor Walz. About 80 percent is what it ends up
amounting to.
Mr. Casten. Are you subject to balanced-budget rules in
your State?
Governor Walz. We are. I cannot deficit-spend.
Mr. Casten. Okay. So, if you do not get money from the
Federal Government, do you have any choice but to make
Draconian cuts in your healthcare and education programs,
practically speaking?
Governor Walz. That is a very difficult one. Probably not.
And I am in a divided legislature, which is both good and bad,
and we are going to have to come to an agreement. That is what
is on our doorstep.
Mr. Casten. I talk to our own Governor out here in Illinois
relatively frequently. I suspect that you, like him, have a
fair amount of communication with the President as you try to
coordinate with the Executive Branch of our Government.
Back in March, when the President was telling Bob Woodward
that he knew this was way worse than it actually was, did he
ever convey that to you or the other Governors?
Governor Walz. No, I don't believe so. The President, early
on, would have weekly calls with the National Governors
Association, so all of us were on there, and I don't recall
that.
Mr. Casten. How much of your time do you spend managing
people who think that this virus is not as bad as it might be
and that masks aren't necessary and that you can take unproven
medicine?
Governor Walz. A lot.
Mr. Casten. Think of what the President has spent.
Governor Walz. Yes, I think it is a lot, and I think it is
unfortunate. Again, my State is home to the Mayo Clinic. I
think this discussion today shows there are valid different
approaches. But I think the elephant in the room here is
whether you believe COVID is a threat to health and has to be
managed or whether you simply let things just go. That is the
trouble we are in.
Mr. Casten. Well, the science doesn't lie.
And I guess just with the little time I have left, if you
want to speculate, how much easier would your life be right now
if the President had been honest to the American people in
March about what he knew?
Governor Walz. It is hard for me to speculate. And one of
the things I would tell you all, is that as a Member of
Congress and then as a Governor, I just have to deal with what
is in front of me one day at a time.
And that is why I wanted to come on here to be clear: I am
so incredibly grateful for what you have done, but there is
more to be done. So if I could just ask, if you could just
stick with us, it would be helpful.
Mr. Casten. Thank you, Governor. We have your back as best
as we can.
And I yield back.
Mr. San Nicolas. Thank you, Congressman Casten.
Just an advisory to all Members and participants: Governor
Guerrero had to vacate the hearing as well.
At this time, the Chair recognizes Congresswoman Pressley
for 5 minutes.
Ms. Pressley. Thank you, Mr. Chairman.
And thank you to our witnesses for joining us today.
As my colleagues on the other side of the aisle and their
counterparts in the other Chamber tout their messaging bill,
here in the House we have offered a comprehensive relief
package that actually meets the scale of these crises: the
HEROES Act, which includes over $900 billion in direct aid to
States and cities.
Collectively, we are facing a global pandemic, the worst
economic crisis since the Great Depression, and a historic
moment demanding this country reckon with the reality defined
by centuries of systemic racism and inequality and oppression.
So, while this virus itself may not discriminate on the basis
of race, every system in the United States, from economic to
education to healthcare, certainly does.
And for Black women, these disparities are compounded.
Today, we face a housing crisis where Black women are twice as
likely to be evicted, a public health crisis where we are up to
3 times more likely to die of the coronavirus, and an economic
crisis where we are twice as likely to be furloughed and 30
percent more likely to be out of work.
The Senate's refusal to act and the Fed's refusal to modify
the terms of the Municipal Liquidity Facility have hamstrung
States' and cities' capacity to manage these crises and to
provide the necessary support to children and families, even as
Fed Chairman Powell has repeatedly acknowledged the
disproportionate effects of this pandemic on people of color.
Governor Walz, I am wondering if you could speak to these
racial disparities and how that shows up in your State, in that
we see communities of color have disproportionately higher
rates of infection, hospitalization, and fatalities?
And I am also wondering if you could just speak to this
historic budget shortfall and what this will mean both for
public-sector employment but also what that impact will be on
the services that they provide?
Governor Walz. Thank you, Congresswoman. I am the last one
standing, but I think it is appropriate that I do need to stand
to answer this, because I am the State where George Floyd was
killed in front of the world. I think a lot of thoughts we had
about ourselves--and I am very proud that Minnesota ranks first
in educational achievement if you are White, but we rank last
if you are Black. The same thing could be said about home
ownership, about college attainment, about many of those
things.
And, early on, when people were saying COVID was the great
equalizer, you are exactly right; it was not the great
equalizer. It exposed health disparities and everything else
that came on.
The problem is, anytime you have an economic downturn,
whether it was caused by the housing bubble or whether it was
this case, because of COVID, it is falling disproportionately
on those communities. And I think we are trying to use this as
an opportunity to address those systemic issues, to listen to
communities as they craft solutions.
But I have to be very candid with you, that is going to
take some resources to be able to do. And this is not a, ``We
are asking you to help us fix all of our problems.'' We are
asking you simultaneously in a system, as we address COVID, to
address it in the right way so, when we come out the other side
of this--
Ms. Pressley. I appreciate that.
Governor Walz. So, I worry. And you are right,
Congresswoman.
Ms. Pressley. So, on the resourcing side of things and
acknowledging those racial disparities, those health
disparities, the HEROES Act also included a significant
increase in the Federal Medicaid matching rate for FMAP.
Governor Walz. Yes.
Ms. Pressley. So, briefly, could you just speak to how
important is an FMAP increase in your ability to really manage
this pandemic?
Governor Walz. It is huge. I obviously would like to see
the HEROES Act, but in negotiating, please don't negotiate away
FMAP. If you can leave that in at the 14 percent, that has a
huge impact.
And those of you on here who were asking us to be
thoughtful and targeted, that targets the most vulnerable
communities, those in need, and makes a difference. So that is
one that I would ask you, please keep in.
Ms. Pressley. Thank you.
And then, let me just return to another question that I had
in there, which is, we have been speaking about the impact on
public-sector employees with this budget shortfall. Could you
also speak to what that impact would be on the services that
they provide?
Governor Walz. Well, it is huge. And I think you heard it
on the local level. You are talking about a lot of local
entities. It is public safety. And that is a discussion,
obviously, in Minnesota and across the country that we are
having: How do we reimagine public safety where that is our
true outcome and there is respect and equity?
But, for us, it starts to become a real problem. There are
very few places for us to be able to manage that budget except,
as I will keep coming back to, healthcare and education. And
those are fundamental tools to the future; they are fundamental
tools to our economic future as a country. And those are what
we are worried about.
Ms. Pressley. And--oh, that is my time. I had an education
question, but thank you for being the last one standing there.
I appreciate it.
Mr. San Nicolas. Thank you, Congresswoman Pressley.
The Chair now recognizes Congresswoman Wexton for 5
minutes.
Ms. Wexton. Thank you, Mr. Chairman.
And thank you to the witnesses for sticking around this
entire hearing.
Governor Walz, listening to you and the other Governors
talk about what your States are experiencing, it sounds an
awful lot like we are experiencing here in the Commonwealth of
Virginia.
In Virginia, we are known for our fiscal responsibility. We
have a triple-A bond rating. Like many other States, we cannot
engage in deficit finance spending. We have a balanced-budget
amendment, and everything that we do has to be paid for.
We had a $300 million surplus at the beginning of this
year, and we are now projecting a $2.7 billion shortfall in the
next 2 years. And, in fact, right now, our State legislature is
in a special session to sort out the budget. And a lot of
legislation that we passed earlier this year is going to have
to be put on hold--things like raising the minimum wage, like
free community college for in-demand fields, like more
affordable housing, expanded access to healthcare, and finally
increasing K-12 funding, which is still funded at pre-recession
levels, and I think we are not alone in that, in that our K-12
funding has not come back to where it should have been after
the Great Recession.
And those are just new initiatives. We are also going to
have to make significant cuts to other areas of our budget. And
it is going to exacerbate the inequality that has already been
made worse by this pandemic.
And I think, Governor Walz, you and other Governors have
done a good job of talking about the austerity and the
decreased revenues that you are experiencing, but I want to
talk a little bit about some of the new expenses that you are
having to deal with--in particular, dealing with the public
health response.
Because very early on in this pandemic, the Administration
made a conscious decision not to implement a national strategy
to battle this virus and, instead, left it to the States to
shoulder the responsibility and cost of doing so. The
Administration declined to invoke the Defense Production Act
for things like domestic production and distribution of PPE,
things like production of test kits, and things like that.
In Virginia, our Governor has joined with a bipartisan
coalition of six other Governors to buy antigen tests in bulk
and distribute them through the State network. But it would
have been much better to have a national strategy.
Can you speak briefly, Governor Walz, about what your
experience has been in your State, in having to deal with
increased costs and less access to the supplies that you need?
Governor Walz. Thank you, Congresswoman.
And I just want to be clear, I am not a complainer. I
supervised a high school lunch room for 20 years, so I do not
complain. I just deal with what is in front of me.
And I have to tell you, of this whole thing, the thing that
makes me the saddest is--and I encourage you all not to fall
into this trap, of pitting State against State, who did this,
who did that. There are a lot of different responses. What it
has done is it has put us in a position where we end up
competing next-door. We end up working against the best
interest of this.
I just have to say, I am thrilled that Georgia's economy is
thriving, because that helps Minnesota and vice versa. And I
think the problem without having a clear supply chain or
whatever, we have been in these situations where we have to
compete with other States. In normal times, a market
competition is a good thing. But if two of you are in the water
drowning, it is not good to fight over one life preserver. We
would prefer two life preservers. And what we are dealing with
at the State level is, it has just been somewhat disheartening
that it is that type of attitude.
And I think, when you sent the CARES Act, you joined
together, and you sent the CARES Act. I think there are
legitimate concerns about whether it was right, wrong, or
whatever, but it was a pretty effort that had some good
effects. I am just asking if we could do that one more time, so
please think about it.
And I would be more than willing--and I think I speak for
the 50 Governors. We would all come in front of Congress and
raise our hands and swear where all that money went and how we
used it and how it was being impacted.
It has been a challenge, having 50 different ways of doing
it. But it is also--States have risen up and found out what
they had in their State. But my fear is this: We are stronger
when we are together, and this just doesn't do us any good, to
pit one area against another or to say we did this better,
because it is just not the way a country gets out of this.
Ms. Wexton. Governor, have you experienced challenges both
with regard to the scarcity of resources and those resources
that are available being more expensive or at a higher cost
than they would have been otherwise?
Governor Walz. Yes. And it is still true today.
I am blessed. My State is home to the Mayo Clinic. This is
3M's home territory. I can go out there and ask for N95s. But
we were very clear about that. This is not about Minnesota
getting N95s and leaving our neighbors in Iowa or Virginia to
just be on their own. We wanted to make sure everybody had it.
Ms. Wexton. Thank you so much, Governor.
And, with that, I will yield back.
Mr. San Nicolas. Thank you, Congresswoman Wexton.
The Chair now recognizes Congresswoman Adams for 5 minutes.
Ms. Adams. Thank you, Mr. Chairman. And I want to thank all
of our Governors and all of the speakers who have been here.
Thank you, Governor Walz, for staying with us. I do know that
it is good to see you and Governor Grisham, who served with me
on the Agriculture Committee.
But I want to, first of all, tell you that the CARES Act
funds have been helpful in keeping students connected to their
teachers in my district. Charlotte-Mecklenburg Schools has used
the CARES Act funding to purchase WiFi hotspots for students.
But the funding is limited, and over 16,000 students in my
district still don't have reliable high-speed network
connections.
My Governor, Governor Cooper, has helped lead the charge to
aid students, most recently with his NC Student Connect
partnership, which provides about $40 million in funding to
help distribute hotspots to students, to provide professional
development for educators, and more. That program was also made
possible by the CARES Act funding.
So, let me ask you about the role that the Federal aid
played in ensuring that your students can continue to receive
the high-quality education that they need?
Governor Walz. Thank you, Congresswoman, and it is good to
see you again.
Yes, it was really helpful. And I am looking at my early
expenditures out of CARES Act money: $245 million to schools to
meet in-person instruction, online learning, and to address
learning loss. This was smart stuff. And I think, for all of
the works that may be in a major package like you put together,
there was a lot there. And it worked, and it is working.
I just don't know if I can stress enough: If we were at the
end of the pandemic, and there were zero cases of COVID, and we
were cleaning up and sweeping up and throwing the last of the
masks out, then it would make sense for us to talk about where
we are going. But I have to plan, and we have to plan that our
schools may need this support for the rest of this year. And
you can't plan day-to-day; you have to look at the long run.
And it was incredibly helpful. Food assistance--I was at a
school today loading food on buses. The City of Saint Paul just
delivered their 8 millionth meal on buses with food service to
children who are hungry. Kids in Minnesota got food and had it
delivered to them because of the CARES Act money and the work
that you all did to get it to them, and we are grateful for
that. If it goes away, though, there is still a problem.
Ms. Adams. I am glad to hear all you are doing for your
schools. I sat for 20\1/2\ years on my State legislature, and
worked with the Governor, so I understand budgets and what you
have to do.
What percentage of your students do you think don't have a
reliable connection to high-speed internet? That has been
mentioned earlier in the hearing, and I think that is a
problem, particularly here in our State, and I am sure in
others as well.
Governor Walz. Yes, it is in ours, too. We are a fairly
large State, stretching up to the Canadian border, and very
rural. But it is also access inside communities. And we have
kids going to McDonald's to try and use their WiFi.
We, as a nation, whether this was--we were working on it
pre-COVID. I would argue, right now, those who want to see
businesses and want to have investments, we should make a big
push on broadband expansion border to border in this country.
And that will benefit us long after COVID is over. But now
would be the time to do that.
But I would say, fully a quarter or more.
And then, it is the access to the equipment and the hard
drives and things like that. And I will say this: Our business
community has stepped up. Best Buy, Target, some of those that
are centered here in Minnesota, have stepped up and made a huge
commitment. One, it is the right thing to do for kids. Two, it
is the right thing to do for the economy. But I wanted to
follow up on Congresswoman Pressley's questions and ask about
the Black and Brown students and how they are affected in your
area?
Governor Walz. They are disproportionately affected. And,
as I said, Congresswoman, as an educator, and as the parent of
a 13-year-old, and as the Governor of Minnesota, I am proud to
be a public school teacher, but we have failed our Black and
Brown and indigenous students. And COVID has made that worse.
My hope is that we use this as an opportunity to finally
quit admiring the problem and actually solve this. And I think
there are some potentials to do that. This is forcing us to
look at new ways of delivering and new ways of thinking about
unique needs.
Ms. Adams. State and local governments play an important
part as employers. Chairwoman Maloney mentioned the public-
sector jobs. But we will send that question to you. I hear that
my time is up.
Thank you, Mr. Chairman. I appreciate it. I yield back.
Mr. San Nicolas. Thank you, Representative Adams.
Just as an advisory to our witnesses and to our committee,
we are down to our last two Members for questions. So, thank
you so much for your patience, and to those Members who have
been waiting patiently for their turn.
Representative Dean, you are now recognized for 5 minutes.
Ms. Dean. Thank you. And I thank our Vice Chair and
Chairwoman Waters for convening this important hearing.
I want to speak right away to the opening comments by the
ranking member, which are puzzling to me, that somehow talking
to you Governors and this expert doctor is somehow a waste of
Congress' time. I can't think of much more important
conversations that we should be having than talking to our
Governors to find out how you are faring, how your States are
faring, so that we can do our job better. So, I just wanted to
put that on the record.
I wanted to start also, maybe, by just saying where I am
from. I am from Pennsylvania, and I was a State representative
before I became a Congresswoman 2 years ago. I had the
opportunity to serve on the Appropriations Committee there, as
well as Judiciary. But on Appropriations, I could see each
budget season, what we were up against, and where were our
deficits, where were our needs, where were our shortfalls in
revenues.
I talked to the current chairman of Appropriations and got
an update for Pennsylvania. And I wonder, Governor Walz, if
some of this sounds familiar to you.
We have an estimated $5.5 billion budget deficit. Even with
CARES--and I thank you for championing the good work that CARES
has done for States and families and workers. Even with the
$0.33 billion that Pennsylvania has from CARES, we still have a
budget shortfall of almost $4.5 billion.
So, I wanted to see what that feels like on the ground. And
I want to start with the issue of--we hear from some of our
Republican colleagues that the States simply haven't spent
their CARES money, so we shouldn't send you any more. I
actually hear that from our Republican Senator here. These are
the same people who argue that for businesses to be stable,
they need certainty and predictability. And yet, they want
Governors to spend down your budget to the last dime before
they will send you another. I don't understand that.
One thing that is undisputed, I think, is that State and
local governments need relief. You need robust relief and facts
and data to open safely, as the doctor has talked about.
Governor, I wanted to ask you, would legislation extending
the deadline for State, local, Territorial, and Tribal
Governments to spend coronavirus relief funds help your State
in particular?
Governor Walz. Representative, yes, it would. It is not the
whole fix, but it would be helpful.
Ms. Dean. And why? Why do you need that flexibility?
Governor Walz. Well, as I said, we have contracts for, say,
testing, or contracts on different buildings, on leasing for
overflow of ICU beds. This would be easier if everything were
done, but as I said earlier, all of a sudden you have a
hotspot, and you have an overflow, and you need to be prepared
to deal with these things.
So if I knew it was going to be over December 31st, that
would make sense. I think extending it out gives us a little
more time.
Ms. Dean. Okay. Terrific.
And is the Governor of Guam still with us, and may I ask
you, Governor Guerrero, would you also appreciate flexibility
and greater support, obviously?
Mr. San Nicolas. Congresswoman Dean, unfortunately, our two
other Governors were unable to remain with us throughout the
duration. Please continue.
Ms. Dean. That is fine. Thank you very much.
Governor Walz, if I could go back to you, I really care,
like Representative Adams, about the kids. I have three
grandchildren, including a little granddaughter who started
third grade yesterday, of course virtually, at home.
And so I wanted to ask you, given your experiences in your
State, how can we best send additional support to schools?
Again, what flexibility is needed? And what is the current
projection for the financial health of public schools in your
State?
Governor Walz. Yes, there are things you could do. I would
go back to Representative Porter, if you can get IDEA funding
there. And I don't want to be a downer, but I carried that bill
in 2007, so good luck to all of you, but it would help.
The status of our kids is, they are okay right now. And
they are okay because teachers, communities, and parents have
gone out of their way to make sure that they are okay. But it
has been expensive. It has been hard.
And if the money that went to schools--and I hear
colleagues across the aisle talking about that. Again, if we
can't get the full HEROES Act, some of the school funding, some
of the ability for us to be able to take care of critical
services, FMAP, that would help. But schools, our budgets are
going to be tough. It is going to be tough. And I think as you
heard, we have not made up from the last time we had cuts.
Ms. Dean. Thank you very much.
I see my time has expired, and I thank you for the
opportunity to be with you.
Governor Walz. Thank you.
Mr. San Nicolas. Thank you, Representative Dean.
Last, but certainly not least, Minnesota takes the stage
with Congressman Phillips and Governor Walz.
Congressman Phillips, you are recognized for 5 minutes.
Governor Walz. It is good to see your seniority at work,
Representative Phillips.
Mr. Phillips. Governor, I have to tell you, how poetic that
it comes down to you and me at the very end. I'm grateful to
you and the others who appeared earlier and for your experience
and dedication in Congress and now to our State. I am a lucky
man to consider you my mentor. So, thank you.
And, as you spoke about earlier today, Governor--you know,
I am proud of our State, the State of Minnesota, the way that
our budget has been handled since the Great Recession, through
bipartisan cooperation--
Governor Walz. That is right.
Mr. Phillips. --and fiscal responsibility that led us to
have the largest rainy day fund that we have had in our State's
history as we entered this year. And, of course, because of
COVID, that $1.5 billion surplus is now a $2.3 billion deficit.
And while the President refuses to help States like ours,
saying that they have been mismanaged, I would argue the
opposite. I think our State is a perfect example, a shining
example of a State that has been a responsible fiduciary for
its taxpaying citizens through this entire crisis and putting
the health and safety of our citizens first. So, I want to
salute you for that. I wish my colleague from Minnesota felt
the same about the need for Federal resources being directed to
Minnesota.
I am also disappointed that the President has failed to use
his authority under the Defense Production Act to secure
medical supplies that would have saved probably thousands of
lives, potentially.
And, Governor, as you know, I am working on legislation
right now that would allow Governors to use the Defense
Production Act (DPA) for critical goods and services that are
produced within the State's borders or finished within the
State's borders to respond to Statewide or national
emergencies. You would have to coordinate closely with Federal
agencies and demonstrate there is a clear need for it that
couldn't otherwise be addressed.
So my question, Governor, is, could you speak about how you
might use such authority and how it would impact our State and
also if there are any obstacles that we should be aware of if
we were to pursue it?
Governor Walz. Thank you, Congressman. It is good to have
you, and I always appreciate your insights. The one thing is--
especially free market folks and the free market of ideas, the
one thing about the 50-State Strategy is it has forced us to be
creative. And so, I appreciate thinking about this. I would
have never believed I would have to become a manager of a
massive testing program managed between the Mayo Clinic and the
University of Minnesota, and implementing that to get 20,000
tests a day to our folks.
But I do think there is some capacity if we could help to
be able to do that. The only thing I would say is a concern is
if this becomes every State is on their own, and it is survival
of the fittest, I worry about that. Because I have to tell you,
ethically, with the ventilator situation and the mask
situation, I was pretty lucky because most of them were made or
headquartered here in Minnesota, between Medtronic and 3M.
I think, though, if the capacity to let us do that as long
as we are not interfering, where some other others were, might
really be helpful, because this has been a challenge. We are 6
months into it, and I wish I could tell you that I have all the
PPE I need, but it is a challenge. I wish I could tell you I
had all the testing I need to really keep things open.
Because the way we keep things open is, here in Minnesota,
every teacher has a saliva test in their pocket that they can
use at any time, put it in, mail it, and get a result in 24
hours. Because we have to do that. If I get one teacher who
tests positive, I don't want to set down a whole district.
So I think the way you are thinking, Congressman, is the
way we probably are going to need to. It would probably be
better on the national level if we can do it. But if that
doesn't happen, States need some authority to be able to do it.
Mr. Phillips. Indeed, to your point, we are 6 months into
the pandemic and still lacking some of those needs. And I share
your concerns about interstate competition and large
manufacturing States, again, States that may not have those
same resources, but the legislation I am considering would
allow that, the use to share with one another to prevent that.
Governor, you have been generous with your time. I am
grateful to you and, frankly, to all of the Governors who never
could have anticipated the circumstances in which you find
yourselves. I speak about Democratic and Republican Governors
around the country who have done yeoman's work, in most cases,
to keep our citizens safe. And I want to thank you.
I also know that you wanted to enter into the record
expenditures, and so, therefore, Mr. Chairman, I ask for
unanimous consent to submit for the record the Minnesota State
expenditures offered by Governor Walz.
Mr. San Nicolas. Without objection, it is so ordered.
Mr. Phillips. And, with that, I yield back the seconds left
of my time. And, Governor, I wish you well, with much
gratitude.
Governor Walz. Congressman, thank you.
Before you close, Mr. Chairman, if I could just use the
last 10 seconds, I would encourage your colleagues in all of
the committees to ask Governors to come on, Democrats and
Republicans. There is very little separation between us on
these issues, and I would like to testify in front of the
Agriculture Committee or the Veterans' Affairs Committee or the
Transportation Committee, because all of them are related. So,
thank you all for sticking with us, and thanks for having me.
Mr. Phillips. Thanks, Governor.
Mr. San Nicolas. Thank you, Governor Walz.
I would like to thank our distinguished witnesses for their
testimony today, particularly our Governors who saw fit to make
time to come before this committee as a priority while they
weigh all of the other priorities within their respective
districts. We thank you sincerely for that.
Dr. Holtz-Eakin, thank you so much as well for your
participation and for sticking with us also to the end.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
This hearing is adjourned.
[Whereupon, at 4:14 p.m., the hearing was adjourned.]
A P P E N D I X
September 10, 2020
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