Cuomo Dares McConnell to Let States Seek Bankruptcy
New York’s Cuomo Dares McConnell to Let States Seek Bankruptcy
(Bloomberg) -- New York Governor Andrew Cuomo dared U.S. Senate Majority Leader Mitch McConnell to pass a bill allowing states to seek bankruptcy, saying it would signal to the stock market and other countries that the economy is flailing.
“You want to send a signal to the markets that this nation is in real trouble? You want to send an international message the economy is in trouble? Do that,” Cuomo said Friday at a press briefing.
McConnell, a Kentucky Republican, has suggested that states could pursue bankruptcy as an alternative to federal stimulus, as a way to ease fiscal crises caused by virus stay-at-home orders. New York, the epicenter of the U.S. coronavirus outbreak, faces a $13.3 billion revenue shortfall and has led governors in lobbying for billions of dollars in cash assistance in the next stimulus bill.
States can’t legally declare bankruptcy, and Congress would need to pass legislation to do so, according to Cuomo, a Democrat. McConnell has indicated that he’s prepared for a massive fight over aid to states.
McConnell said this week that states with high public-employee pension obligations -- mostly those with Democratic governors -- had troubled finances before the outbreak, and that Congress shouldn’t be “rescuing them from bad decisions they’ve made in the past.”
Cuomo called McConnell’s comments about “blue-state bailouts” and bankruptcy “the most un-American, uncharitable, ugly statement of all times.”
On a call Friday afternoon with governors and senior members of the Trump administration, Cuomo was the only one who mentioned McConnell by name, according to a person who was on the call and requested anonymity as a condition of speaking. As many as 12 governors spoke, mostly about testing, stimulus guidance and additional state aid, the person said. Vice President Mike Pence, White House task force coordinator Deborah Birx and Anthony Fauci, the nation’s top infectious disease expert, were on the call, the person said.
Lost Revenue
In New York, where more than 270,000 people have tested positive for Covid-19 and more than 16,000 have died, the state is projecting a $61 billion hit to revenue between this year and fiscal 2024. The economy is largely at a standstill as costs for medical supplies and essential services rise.
New Jersey had more than $34 billion of bonds downgraded Tuesday by Fitch Ratings because of the financial toll of the coronavirus pandemic. The downgrade cames as Governor Phil Murphy is seeking to borrow as much as $9 billion through the Federal Reserve’s first-ever program to lend to states. New Jersey would increase property and sales taxes, if need be, to repay the debt.
On Friday, Murphy said he had was working to get the U.S. Treasury Department to loosen its rules for the use of federal aid.
“I had a very productive call this morning with Secretary of the Treasury Steven Mnuchin. We’ve got big money issues,” he said at a late-afternoon news conference. “We have to make sure we get what’s rightfully ours.”
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