Fact check: Mitch McConnell says Democrats want to create a ‘slush fund’ for Gavin Newsom

Claim: “Democrats are acting like it’s more important to supply the governor of California with a special slush fund than to help restaurant workers in California keep their jobs,” Senate Majority Leader Mitch McConnell said in his opening floor speech Friday.

Rating: Untrue.

Details: Democrats as well as nonpartisan groups that follow state budgets have argued for months that state and local aid be included in any coronavirus relief package.

“Additional federal aid is expected to lessen, but not eliminate, the need for spending cuts at the state level,” Brian Sigritz, director of fiscal studies for the nonpartisan National Association of State Budget Officers told The Bee Friday. Some states have already cut money for schools, colleges and universities and state worker payrolls.

Many Republicans, though, have balked at more federal aid to state and local governments, contending they should not be rewarded for what they consider poor spending decisions of the past.

Friday, McConnell added a new wrinkle, suggesting that because Democrats won’t give in on that point they are hurting people who need help.

“These demands for state and local government giveaways are blocking urging aid for struggling families at a time when many states’ tax revenues have largely gone up, up.”

McConnell said today that last month “California admitted their tax revenue for this fiscal year was running about 19% ahead of what they had predicted.”

Gov. Gavin Newsom, McConnell said, described a “windfall, not a horrible budget crunch, but a windfall of nearly $16 billion.”

It’s true that California revenues this fall have exceeded projections, thanks partly to higher-income earners still working and federal aid that helped businesses and unemployed Californians.

The Legislative Analyst’s Office did use the term “windfall” to describe its findings and said last month that California could have $26 billion in one-time surplus funds to help balance next year’s budget. But it also warned deficits will go up again in the future.

State lawmakers, McConnell said, are considering putting the money into cash reserves. “They aren’t just getting by, they are putting more money away,” he said.

Senate President Pro Tem Toni Atkins, D-San Diego, has suggested using the surprise money to help those affected by COVID-19, aid local governments and used to help in other areas.

House Speaker Nancy Pelosi, D-Calif., and Senate Minority Leader Chuck Schumer, D-N.Y., McConnell charged, “have persuaded their entire conference that nothing should pass unless the governors of California and New York get to cut the line and jump in front of millions of Americans who are trying to figure out how to pay their bills each and every month.”

Advocates of the federal aid have said the funds would be used for a variety of programs that help constituents. In California, the spring’s Coronavirus Relief Fund’s uses included aid to schools, public health and safety workers, food support and small businesses.

While the National Association of State Budget Officers is still compiling the latest data, there’s plenty of anecdotal evidence that states badly need financial help.

“States are facing tight fiscal conditions with many experiencing both increased spending demands and declining revenue,” said the budget officials’ Sigritz.

He said state spending is “likely to be constrained for the rest of the fiscal year, into fiscal 2022, and beyond. Right now states are facing a lot of uncertainty regarding what the coming months will bring concerning COVID-19 cases, the economy, and if there will be an additional aid package.”

In California, “a temporary one-time spike in revenue doesn’t mean that California’s economy isn’t continuing to suffer from the COVID recession — and if the Senate fails to act, it will only compound the economic hardship that struggling California families continue to face. The numbers starkly bear this out,” said H. D. Palmer, state Department of Finance spokesman.

He noted that without congressional action, 1 million Californians stand to lose their federal unemployment benefits later this month.

“That’s a clear and immediate threat,” Palmer said. The state’s October unemployment rate, the most recent reported, was 9.3%, well above the February rate of 3.9% just before the coronavirus sent the economy reeling.

In McConnell’s home state of Kentucky, the outlook was grim when the state made its revenue assessment in August.

“The revenue outlook has changed dramatically due to the COVID-19 pandemic,” wrote John Hicks, state budget director. The projected drop in general fund revenue would be the first annual decline in 11 years.

“Fiscal year 2020 receipts contained a fourth quarter decline, which would have been more profound without the significant federal relief to individuals and business,” he said.

In some other states, “damaging cuts have already begun,” said a report last month from the Center on Budget and Policy Priorities, a progressive research group.

It found that in Georgia, the state cut $1 billion for schools. Maryland enacted a series of emergency cuts, including reduced help for colleges and universities.

The impasse over state and local aid, as well as Democrats’ reluctance to back the GOP’s desire to shield businesses and health care workers from COVID-related liability, has stalled progress on an economic relief package.

Talks will continue. “There are a few states who don’t need the help, but many more states do,” Schumer said. “This is mind-boggling.”