STATEMENT: PA CARES 21 Proposal

Marc Stier |

Today, Pennsylvania Senate Democrats have put forward a bold plan to borrow funds at low interest rates to provide relief to many Pennsylvanians who are still struggling with the devastating effects of the COVID-19 pandemic. For three reasons, it should be enacted quickly.

First, it is desperately needed not to just to provide immediate relief to small business, the unemployed, local governments, our schools, health care providers, front-line workers and others but to keep the Pennsylvania economy from falling deeper into recession. The failure of the General Assembly to use the remainder of the CARES funds to provide aid to vulnerable Pennsylvanians, and especially to our small businesses, front-line workers, and health care providers was a dereliction of their responsibility to protect the most vulnerable in this crisis. And, as the IFO pointed out, the fairly quick, albeit partial, rebound from the economic disaster in the second quarter was made possible by the impact of federal stimulus on the economy of the Commonwealth. We can already see evidence that the economy is slowing as many elements of CARES have ended. We can also expect an even deeper economic decline when the enhanced unemployment provisions run out at the end of this month.

Second, it makes sense for the state to borrow funds to help Pennsylvanians overcome this once in a lifetime emergency. (We have been pointing this out since the start of the pandemic in March, and most recently in our analysis of the budget recently enacted by the General Assembly.) While the pain of the pandemic is immediate, the problems it will create for businesses that will close, workers that will lose jobs, students who will not receive the education they deserve, and those who will not receive the health care they need will continue far into the future. Just as we borrow funds to spread the cost of infrequent natural disasters and war over more than one year (or in the case of the borrowing that paid the costs of fighting World War II, over more than one generation), borrowing to spread the pain of a once-in-a-lifetime natural disaster makes sense.

Third, the program is likely to add, not subtract, from state coffers in the short term—and the long-term costs are manageable, in part because interest rate are close to their historic low. We will conduct a deeper analysis in the next week but it appears to us that in the short term this plan will have a positive impact on the state budget. The economic stimulus it provides will generate immediate revenues for the state this year and the next. And the provision of aid to small business and workers will reduce the demands for state services for unemployment insurance, Medical Assistance, and other programs. The economic benefits will continue over a longer term. For example, helping restaurants in our tourist industry survive during the crisis will leave them in place in Pennsylvania tourist destinations once the pandemic ends. And while the long-term yearly cost of $200 million a year is of some concern to us, they will add just a little to the ongoing yearly struggle to balance the budget.

Our one concern about the plan is that it does not clearly include undocumented immigrants in the spending plans. It is shameful that undocumented immigrants, who work hard and pay taxes in Pennsylvania and the country as a whole, have not received any relief in this difficult time. This proposal creates an opportunity to rectify this injustice by allowing undocumented immigrants to receive unemployment insurance and assistance in securing food, housing, and childcare.

The Senate Democrats are offering Pennsylvania the right plan at the right moment. The General Assembly should prepare to enact it immediately upon returning to Harrisburg in January.

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