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Senate Majority Leader Mitch McConnell (R-Ky.) said Wednesday he isn’t about to let states use the coronavirus pandemic as an excuse to force federal taxpayers to settle trillions in pension debt.
His pledge comes as congressional Democrats are demanding even more money for states that are struggling from losses of tax revenue due to governors’ decisions to shut down their economies.
“My guess is their first choice would be for the federal government to borrow money from future generations to send it down to them now so they don’t have to do that,” McConnell told talk radio host Hugh Hewitt, the UK’s Daily Mail reported.
“That’s not something I’m going to be in favor of,” he added. “I would certainly be in favor of allowing states to use the bankruptcy route. It saves some cities. And there’s no good reason for it not to be available.”
Under current bankruptcy law, cities are allowed to declare bankruptcy and many have. But states are not; instead, they have to find ways to balance their budgets and pay their bills most generally by cutting back on expenditures including pension payments, when legally permitted to do so.
But since states are suffering from losses of tax revenues due to shuttered businesses, the Majority Leader said he’s in favor of allowing states to enter into bankruptcy.
That said, he made clear that any funding sent to states to help offset their pandemic-related losses should not go to pay pension debt that has built up over the years thanks to gross mismanagement from current and past state administrations and legislatures.
“You know, we’ll certainly insist that anything we’d borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs,” McConnell told Hewitt.
“There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations,” he said.
One state where pension debt has long reached crisis levels is Illinois. Democrats there have sent a letter to their entire U.S. congressional delegation seeking more than $41 billion from the federal government in an upcoming coronavirus relief plan that would include $10 billion specifically for pensions.
Senate President Don Harmon requested the help in a letter to U.S. Sens. Dick Durbin and Tammy Duckworth and Illinois’ congressional delegation, including $15 billion in block grant funding to fill budget gaps over three years, $9.6 billion for local governments and $6 billion for Illinois’ unemployment insurance system.
“I realize I’ve asked for a lot, but this is an unprecedented situation, and we face the reality that there likely will be additional, unanticipated costs that could result in future requests for assistance,” Harmon wrote.
In the past, Durbin, Illinois’ senior U.S. senator, has said he does not support direct federal bailouts of the state’s underfunded pension.
U.S. Sen. Dick Durbin says he does not support federal bailout of Illinois' massive pension debt; says it's a state issue.
— Michael Puente (@MikePuenteNews) October 3, 2014
But Sen. Tom Cotton (R-Ark.), claimed in a floor speech last month that Durbin was plotting with Senate Minority Leader Chuck Schumer (D-N.Y.) “behind closed doors” to include pension bailout funding in upcoming coronavirus relief bills (see around the 3:20 mark)
“Oh, and don’t forget all of their cities and all their states. Dick Durbin represents one of the most bankrupt states in America and the most bankrupt city, Chicago, in America behind those closed doors,” he said. “They are demanding straight cash bailouts for states and cities that have been fiscally irresponsible for years…. We are willing to help those cities and states. They are overwhelmed by this pandemic. Yet we simply say they have to repay the money on the back end. That’s not what the Democrats are asking for behind those closed doors over there. They want straight cash payments.”
Most states with massive pension debt have either been run by Democrats or dominated by the party for years, including Illinois — which was already bleeding tax base and population before the coronavirus pandemic thanks to gross mismanagement.
As for McConnell, he says he’s good with waiting for now to pass yet another enormous ‘recovery’ bill.
“We need to see how things are working, see what needs to be corrected, and I do think that the next time we pass a coronavirus rescue bill we need to have everyone here and everyone engaged,” he said.
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