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COVID dollars: Stimulus, relief or bailout? A closer look at some math

March 8, 2021

In a recent Chicago Tribune op-ed (“Don’t call it a ‘bailout.’ The states urgently need federal relief”), state comptrollers Susana Mendoza (Illinois) and Kevin Lembo (Connecticut) called for large-scale new federal government spending directed at state and local governments, citing demand for government services amidst economic hardship.

In making their case, they stated:

"While both Illinois and Connecticut have been addressing long-standing fiscal challenges and legacy costs within our respective state budgets in recent years, both also act as donor states, contributing more in the form of federal taxes than we receive back in federal aid."

This reasoning is consistent with other widely-reported efforts to deflate claims that federal “stimulus” dollars unfairly penalize fiscally responsible states. The “bailout” claims are unfair, the argument goes, because fiscally challenged governments tend to be in states that send more money to Washington, D.C. than they get in return.

But let’s take a closer look at this reasoning.

In the first clause of the sentence quoted above, Mendoza and Lembo are referring to Illinois and Connecticut, and specifically, the state governments of Illinois and Connecticut. But then they say that Illinois and Connecticut act as donor states, contributing more in federal taxes than “we” receive from the federal government.

Who is this “we?”

Illinois and Connecticut state governments don’t pay taxes to the federal government. In Illinois’ latest financial report, a report prepared by the department led by Mendoza (note that the latest report available is for fiscal 2019, for a fiscal year that ended more than 600 days ago), Illinois reported roughly $25 billion in grant “revenue,” most of it from the federal government. This doesn’t add up to Illinois contributing more in federal taxes than it receives from the federal government.

So how does their math work?

To claim that Illinois and Connecticut act as donor states, Mendoza and Lembo are “counting” on the money sent by their state’s taxpayers to the federal government, a very large amount.

But when they call for federal “relief,” they aren’t calling for federal money for state taxpayers. They are calling for federal “relief” to be sent to state governments.

They are adding and subtracting apples and oranges, deceptively.

As an Illinois taxpayer, I don’t need federal “relief” for the Illinois state government. I would have to pay for that, along with taxpayers in responsible jurisdictions in other states.

Meanwhile, it looks like the light at the end of the tunnel is going to arrive this week.

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