INDIANAPOLIS — State officials are eagerly anticipating potential federal aid to help plug a budget shortfall expected to be well in excess of $1 billion.
With state revenue projections missing the mark by almost $1 billion in April and more shortfalls imminent, Gov. Eric Holcomb last week called for agencies to cut their budgets by 15% to rein in spending.
In Washington, D.C., federal legislators are debating another round of funding designed to stimulate the economy. House Democrats insist on earmarking funds for states and cities, while many Republicans oppose the plan.
Indiana received $2.4 billion to cover virus-related expenditures under the March CARES Act, but some officials in some states have decried limitations on use of the funds, which can’t be earmarked to fill revenue gaps.
The state hasn’t announced a plan for spending those funds, aside from $300 million for municipalities. On Wednesday, state officials unveiled a program to aid small businesses not covered by the Small Business Administration’s Paycheck Protection Program but didn’t release details.
Under the House Democrats’ proposed HEROES Act, totaling $3 trillion, at least $900 billion would go to states, counties and cities in flexible aid — with no limitations on how the funding can be used.
The National Conference of State Legislatures, along with the National Governors Association, asked Congress in mid-April to make aid flexible retroactively.
“Unlike prior recessions, the current decline in state and local revenues … (was) unforeseeable, immediate and unprecedentedly large,” the legislatures group said. “Without the additional federal aid to replace the immediate volume of anticipated revenue losses, many states, territories and local governments will require significant cuts.”
The Tax Foundation, a nonprofit tax research organization, analyzed the division of the funds, which would be allotted based on population, number of COVID-19 cases and unemployment. Indiana could receive $5 billion for the state and $7.8 billion for municipalities in “guaranteed” funding, which isn’t contingent on COVID-19 cases or unemployment statistics.
Rough estimates based on COVID-19 cases and unemployment conditions on May 12, indicate Indiana could receive an additional $4.5 billion for unemployment and $700,000 for COVID-19.
With a recession looming, it might take years for the economy to recover. Job losses in the past two months, with 41 million applying for unemployment benefits nationwide, wiped out gains since the end of the Great Recession.
The Democrat’s HEROES Act includes funding for another round of stimulus checks and extends unemployment benefits to 2021. But Senate Republicans seem reluctant to pass another stimulus bill, claiming Democrats are using aid funds to push unrelated political goals.
U.S. Sen. Mike Braun of Indiana tweeted that the country already had a trillion-dollar deficit and called it a “bargaining ploy.”
“Speaker (Nancy) Pelosi’s $3 trillion dollar wish list is completely out of line — it’s just a bargaining ploy,” Braun said in a tweet with an attached news clip.
Braun, a member of the budget committee, criticized the federal government for not sticking to a budget and said the bill would be “dead on arrival” in the Senate.
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