Cash deluge....

Governors enjoy cash deluge right before they face the voters

From "Walz checks" to nurse bonuses, state leaders are pushing money out the door in a competitive reelection year.

By LIZ CRAMPTON

Governors across the country are sitting on mounds of cash just when they need it most: election season.

Tennessee Gov. Bill Lee wants to spend $500 million on expanding broadband access in underserved areas. Minnesota Gov. Tim Walz hopes to send $350 payments to residents that he’s dubbing “Walz checks” — a move Republican leaders have attacked as a reelection ploy.

And New York Gov. Kathy Hochul is looking to give out property tax rebates and health care worker bonuses from her state’s $7 billion surplus, an enviable position of strength that has already helped scare off would-be challengers such as former New York City Mayor Bill de Blasio and state Attorney General Tish James.

After suffering through the bleakest of deficits during the early days of the pandemic, many governors now get to spend record sums, thanks to massive aid packages from Washington and booming tax revenues. More than two dozen governors are up for reelection this fall, and they couldn’t ask for a better cash situation at their disposal.

“I just wish I could close my eyes and wake up back in the mansion and be Kathy Hochul,” said former New York Gov. David Paterson, who faced a three-year shortfall of $47 billion in 2009 and ultimately withdrew his 2010 gubernatorial bid as Andrew Cuomo gained momentum.

Congress’ latest lifeline to states in the pandemic sent $350 billion to state and local governments, with populous places California, New York, Florida, Texas and Illinois getting the biggest chunk of change. States are also preparing to draft plans on how to spend the $1.2 trillion infrastructure package intended to repair dilapidated bridges, roads, ports and public transit.

Those federal funds are on top of record-high state budget surpluses. State revenues grew 14.5 percent from fiscal 2020 to 2021, according to the National Association of State Budget Officers. Thirty-two states reported that 2022 revenues were coming in ahead of forecasts as the economy has picked up.

New York state lawmakers are jumping into budget negotiating season without a gaping deficit for the first time in years. And Hochul, according to recent polling, is the clear favorite for the Democratic primary in June, often a more significant contest than the general election in the deep blue state.

The new governor, who replaced Cuomo in August after he resigned amid sexual harrassment allegations, has proposed increasing education funding by $2.1 billion. She's vowed to start a multiyear $10 billion investment into the state’s dwindling health care workforce — a group further decimated by the strains of Covid-19 — including $1.2 billion for a frontline health care worker bonus program.

And she wants to give money back to taxpayers: Hochul is pushing to accelerate a $1.2 billion personal income tax cut and has proposed a $2 billion property tax relief program.

In California, Gov. Gavin Newsom wants to use a $46 billion windfall to fortify his left flank while dangling financial relief to strapped residents. The Democratic governor hopes to extend state health care benefits to all low-income undocumented immigrants, delivering a significant victory for progressives. All residents could see other election-year boosts to their wallets, including the suspension of a gas tax hike mandated by state law.

California has enjoyed two consecutive years of record surpluses owing to the state’s high-income taxpayers, many of whom have benefited from the riches of stock market growth. Last year, Newsom and state lawmakers gave Golden State Stimulus checks to residents with household incomes below $75,000 — right as the governor faced the threat of a recall campaign.

As Newsom heads into a 2022 general election, he’s overwhelmingly favored to win and considering another round of checks to Californians, which he considers a model for other governments.

“It’s a deep point of pride to see someone that’s a beneficiary of a stimulus check or young child tax credits,” Newsom said at his budget rollout earlier this month. “It’s a point of pride when California leads the nation and you see those policies reflected in proposals coming out of the White House.”

Republican reluctance to cash in

But the bonanza poses an ideological problem for Republicans who don’t want to appear eager to accept money from the Biden administration.

Republicans have time on their side: Funding from the American Rescue Plan Act doesn’t need to be obligated until the end of 2024 or spent until the end of 2026, giving the GOP an incentive to delay handing a win to Democrats until well after the November elections.

Texas Gov. Greg Abbott, for example, directed state agency heads to be careful before taking federal infrastructure funds in case any strings are attached.

“Please be vigilant and communicate frequently with my office before you proceed with accepting or applying for federal funding opportunities,” he wrote in December, adding that the federal government may demand actions “contrary to the law or the policy of this state.”

In New Hampshire, Republican Gov. Chris Sununu has not yet announced how the state intends to spend a discretionary part of the $77 million in child care assistance granted by the American Rescue Plan Act that was passed more than 11 months ago. The state also has been slow to distribute rental assistance, food insecurity program dollars and mortgage aid.

Democrats in Washington have accused Republican state officials of intentionally slow-walking the money. Sen. Jeanne Shaheen (D-N.H.) called it “governing malpractice.”

“It's really frustrating to see the lack of preparation, the lack of commitment to provide help to people when they need it,” Shaheen, a former governor, said in an interview.

Republicans are doling out some of the money. Abbott himself has called for spending $362 million on education initiatives such as expanding charter schools. In Tennessee, Lee wants to address the many residents who lack reliable internet access, a logistical setback that limits students’ learning and restricts economic development.

And Florida Gov. Ron DeSantis has actually embraced the Biden administration’s federal stimulus as he faces reelection. His nearly $100 billion spending plan includes at least $3.5 billion from the president’s American Rescue Plan.

DeSantis is aiming to use those federal dollars for a gas tax break, $1,000 bonuses for police and teachers as well as government grants for the environment and programs to boost the state economy. The GOP-dominated Florida Legislature must still approve DeSantis’ proposal, but he has proven to be particularly persuasive with lawmakers.

Notably, DeSantis’ public acceptance of Biden’s cash has caused some friction with others in his party, including Sen. Rick Scott (R-Fla.), who last year urged states to reject federal stimulus dollars.

“If Florida were to send the money back, [Treasury Secretary Janet] Yellen is going to send it to Illinois, California, New York or New Jersey,” DeSantis said in March. “I don’t think that would make sense for Floridians — for us to be giving even more money to the blue states that already getting such a big windfall in this bill.”

Divided governments impede spending

Newsom and Hochul have a clear advantage in turning their plans into reality: largely cooperative legislatures controlled by the same party.

Elsewhere, the task is not so easy. In some states, Republican lawmakers are reluctant to hand Democratic governors a win in a competitive reelection cycle.

Kansas Gov. Laura Kelly, a Democrat and one of the nation’s most vulnerable incumbents, is trying to carefully balance spending money on education and workforce training with appeasing fiscal conservatives by cutting the food sales tax and reducing state debt.

Kentucky Republicans preempted Gov. Andy Beshear and filed their own budget proposal before he unveiled his own, foreshadowing a likely combative process. Beshear, a Democrat, is up for reelection in 2023.

Michigan Gov. Gretchen Whitmer wants to direct a mountain of money to fixing some of the state’s most pressing problems: contaminated drinking water and crumbling infrastructure.

The Democrat, who is facing a tough reelection bid, wants to replace lead service lines and clean up PFAS pollution — serious public health issues exposed by the Flint water crisis. She’s also attempting to follow through on a campaign promise to “fix the damn roads.”

But Whitmer for months has been at odds with the Republican-controlled legislature on how to spend the money. Some Republican lawmakers have pushed to withhold federal funds until she lifts Covid-19 public health orders.

Republican leaders are signaling continued resistance as billions in undesignated funds sit unused. The chair of the Michigan House Appropriations Committee has called for state spending to be “cautious and smart” due to concerns about inflation, supply chain and labor shortages.

Michigan Democratic strategist Jill Alper, who has advised several Democratic presidential campaigns, said Whitmer’s spending plans are “the right decisions irrespective of politics.”

“Having said that, good policy is good politics because if you’re meeting the demands of people and fixing the policy problems important to them, they’ll support you for a second term,” Alper said.