Republicans are abandoning the states

For half a century, the Republican Party was the party of the states. Republican politicians criticized federal courts from interfering with states’ prerogatives, on civil rights and other issues. Republican Presidents Richard Nixon and Ronald Reagan, and a Republican Congress — led by Speaker Newt Gingrich — dismantled federal social programs and sent a fraction of the money to the states to spend as they chose. Efforts to win the votes of Republican senators led the Senate Finance Committee to design the relatively decentralized, state-controlled Affordable Care Act that we have today (rather than the more federally directed version that had passed the House).

Democrats, too, were cognizant of states’ concerns: Many Democratic members of Congress are former governors and state legislators and retained sympathies for their former colleagues. But with its resurgence in the late 1960s stemming from its absorption of civil rights opponents proclaiming “states’ rights,” the Republican Party has been the dominant champion of the states.

How times have changed. The Trump administration tried to strip states of environmental policymaking authority that its Republican predecessors demanded that they be granted. The party that once insisted that education was fundamentally a local matter is now pressuring states and localities to resume in-person education. The president has pushed for state election laws to be overridden. None of these moves have brought substantial criticism — much less action — from the vast majority of congressional Republicans. Indeed, Senate Majority Leader Mitch McConnell (R-Ky.) is demanding that state tort law be nationalized.

Perhaps the Trump administration’s most dramatic undermining of states has been in the fiscal realm. By reducing the traditional deductibility of state and local taxes to partially pay for its corporate and upper-income tax cuts, the 2017 tax law made it harder for states and localities to maintain the revenues they need to operate.  

This has gotten much, much worse during the current crisis. The sudden, deep recession devastated the sales and income taxes on which state governments depend while increasing demand for anti-poverty programs they fund. States now face an estimated $555 billion shortfall over three years, far worse than the impact of the Great Recession. And that is not counting the additional deficits hitting local governments, transit authorities and other sub-state units — losses for which they are seeking state aid.

If states are forced to slash services when their people most need them, people will come to regard them as unreliable and look more to the federal government. That prospect — even more than the direct harm those cuts would cause — would have alarmed an earlier Republican Party. And Republicans still hold a majority of governorships and risk voters’ blame for budget crises not of their making.

Yet the Trump administration and congressional Republicans fought to limit the state fiscal relief included in the coronavirus relief legislation this spring, and the Treasury Department narrowly interpreted what did pass. The administration’s vehement opposition to state fiscal relief reportedly is one of the main sticking points, along with unemployment assistance and election funding, over which the administration broke off negotiations with congressional Democrats.

Perhaps the crowning insult to states was the substitute unemployment assistance program the president announced Aug. 8. Even if implemented as proposed, it would not be much of a program: It would only have enough money to pay benefits into the first week of September. And many states probably could not do the extensive reprogramming of their antiquated unemployment compensation computer systems required to get it out before other states have used up the available funds.

The even bigger problem, however, was that the program was unlawful. The Stafford Act has a long list of aid FEMA can provide: debris removal, food distribution, housing assistance, transportation, etc. That includes unemployment assistance, but with certain conditions. The Stafford Act then allows FEMA to provide aid with “other needs.” Unemployment assistance is not something “other” because it is listed in the statute. If Congress had intended for its statutory restrictions on unemployment assistance to be optional, it would have said so; it would not have rendered them meaningless by allowing an administration to circumvent them by renaming a non-compliant program one for “other needs.”

In addition, the Stafford Act requires states to pay one-quarter the cost of any “other needs” aid that FEMA provides. The president’s initial announcement complied with this requirement, specifying a $400 weekly benefit of which states would pay $100. When both Democratic and Republican states protested that, with their deep deficits, they could not come up with the almost $15 billion required, the administration changed the program to a $300 weekly benefit funded entirely by the federal government.

This introduces a second element of illegality by effectively waiving the state matching requirement, which the Stafford Act does not allow. The Trump administration claims to be counting money states are already required to pay as regular unemployment compensation as the states’ match, but this does “share” the cost of the FEMA benefit with “funds made available by the State,” as the Act requires. It also double-counts the state unemployment benefits, which are already being counted under another federal law. That violates longstanding, government-wide accounting rules designed to ensure fiscal integrity.

This puts states in an impossible bind, caught between their desperate unemployed workers facing eviction or foreclosure and the likelihood that the Department of Homeland Security’s inspector general or Government Accountability Office (GAO) will declare the whole thing illegal and require them to pay it all back.

The danger to states is real. The Stafford Act is generous to those in need but harsh towards those receiving funds improperly. The act calls for sweeping audits conducted by both the executive branch and GAO. The Inspector General or GAO are likely to apply the Act’s provision treating full federal funding for activities that require cost-sharing as a loan that “shall be repaid to the United States.” The statute of limitations for seeking repayment in non-fraud cases is three years.

Treating the states as pawns in a power struggle with Congress is antithetical to the respectful federalism our Founders envisioned. It should not be tolerated. The president should return to the negotiating table and hammer out a legislative extension of unemployment benefits and sufficient fiscal relief that states can weather the recession while providing basic services to their people.

David A. Super is a professor of law at Georgetown Law. He also served for several years as the general counsel for the Center on Budget and Policy Priorities. Follow him on Twitter @DavidASuper1