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Congress should reject state bailouts

As pandemic restrictions loosen, Nebraska is growing again. While some states continue to struggle through the current coronavirus impacted economy, Nebraska now has the lowest unemployment rate of any state in the country. We have struck a balance between slowing the spread of the virus to preserve our hospital capacity and letting people return to a more normal life. In doing so, we have avoided the major budget shortfalls that are being faced by many states. Our financial position was so strong that our legislators worked with me to deliver major property tax relief in July. We also increased aid to families harmed by last year’s devastating floods while leaving a healthy cash reserve.

We did all this without borrowing against our future and still investing in key priorities including education and infrastructure. While we have a strong pay-as-you-go tradition in Nebraska, we know that is not the story in every state. Consequently, it is unsurprising that we continue to read about misguided efforts to pass a bailout of the states in Congress. For those of us who believe in federalism and fiscal responsibility, passing a federal bailout would be a colossal mistake on the part of Congress.

What is our secret in fiscally responsible states like Nebraska that help us avoid this federal dependency? We don’t spend money we don’t have. In many states, however, government gets in the way of prosperity and innovation by accumulating massive amounts of debt and unfunded liabilities — costs future generations of taxpayers will shoulder. Thankfully, Nebraska’s Constitution bars our state from incurring virtually any debt.

Because of our budget discipline over the years, my administration has been able to make tax cuts central to our fiscal policy. When conforming to the recent federal tax changes in the Tax Cuts and Jobs Act, Nebraska made it clear that any impact on our state tax code would become a permanent tax cut. By linking our tax brackets to a favorable consumer price index measurement, retaining the personal exemption on state taxes, and enacting a new standard deduction, Nebraska income earners will now also save over $250 million annually on state taxes.

Even with this income tax cut and the largest property tax cut in state history, Nebraska’s financial footing is as strong as ever. Our AAA bond rating, an uncommon benefit secured by making responsible choices over many years, has given Nebraska one of the best financial positions of any state. Moody’s regularly ranks Nebraska as one of the least indebted states thanks, in part, to our well-funded state retirement programs.

Through the years, Nebraska’s elected leaders have navigated economic peaks and valleys, and all the challenges in between, by living within our means. As Congress considers sending more money to the states, they should look at how funds are dispersed and what — or more importantly who — they intend to help. As of June 30, the U.S. Treasury reported that most states had spent less than half of COVID Relief Funds (CRFs) appropriated by Congress.

If state governments won’t or can’t spend the already appropriated CRF funds why do they need more? Congress should not hand states another blank check that gives more money to government for “shovel ready” programs that don’t help people right now and don’t directly address economic challenges as a result of coronavirus.

We’ve seen this before.

In 2009, the federal government bought back cars through the infamous “cash for clunkers” program and invested in infrastructure projects that would help our states years later. The capital infusions for “shovel ready” projects didn’t immediately help people put food on the table or keep businesses afloat who are struggling to make payroll.

For these reasons, Congress should reject a state bailout. We must remind Washington that we should preserve federalism and govern our own affairs as we emerge from these challenging times.  Washington stepped up to blunt the impact of the early shutdown. Now it’s time for the states to do their part. States like Nebraska can choose to reduce tax burdens, encourage job growth, and act as responsible stewards of state finances.

It’s time for Congress to draw a line in the sand for states and to send a message that states should take responsibility for getting spending under control and managing their affairs. They should not reward years of mismanagement unrelated to the pandemic with a D.C. bailout, while making states like Nebraska foot the bill.

If Congress holds the line, they can help states make much-needed tough decision, and start a much-needed return to fiscal discipline across the nation.

Ricketts is the governor of Nebraska.


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