Cuomo Dares McConnell to Let States Seek Bankruptcy

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.

Read more: McConnell’s Hometown Will Be Hit Hard Without Federal Bailout

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.”

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.

“The state finances were very, very strong, and then this economic tsunami hits and you shut down all the businesses, everybody stays home, they’re not getting a paycheck, they feel economic anxiety,” Cuomo said. “The consequences to the state is the revenue projections are way down.”

State lawmakers earlier this month passed a $177 billion budget for fiscal 2020-21, which began April 1. The spending plan includes provisions giving the governor and budget office permission to adjust allocations throughout the year to cope with reduced cash flows.

New York is beginning to claw its way out of the crisis, with fatalities falling to the lowest daily rate, 422, since March. Hospitalizations also continue to drop, to 14,258 as of Thursday.

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