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Why the Coronavirus Won't Reshape State Governments

Liberals are calling for an expansion of government, while conservatives say budget shortfalls must lead to cuts. One scholar argues that after the current crisis passes, states will end up looking much like they do now.

States are facing a historic challenge. Forecasters predict they’ll fall short of revenue projections by 20 percent or more, even as they’re coping with a public health emergency.

In response, some policymakers are starting to think big. Given the depth of the challenge, something different must be done, according to this line of thinking. Crisis not only affords but demands the opportunity to do things in new ways.
For conservatives, this means thinking about what state programs are essential, which can possibly be jettisoned, and how can services be delivered in cheaper, more efficient ways. Some are talking about the need to shrink spending dramatically and perhaps restructure major spending categories such as public employee retirement benefits.
Liberals are taking the opposite tack. They see the need for major government interventions including a Marshall Plan for public health, universal health coverage and paid sick leave and other labor protections and benefits.
It’s possible that none of this will happen. Given the short-term demands of the pandemic and drastic unemployment, there may be limited bandwidth or resources available to carry out grander, long-term visions of any kind. 
“It’s what some people call now-more-than-everism,” said Matt Grossmann, director of the Institute for Public Policy and Social Research at Michigan State University. “The instinct is that, whatever calamity we face, ‘now more than ever’ we need what we thought was a solution before.”
Last year, Grossmann published Red State Blues: How the Conservative Revolution Stalled in the States. Despite their enormous political gains, he argues, Republicans failed to reshape state government. They scored policy successes in areas such as opposition to abortion, gun control and labor unions, but failed to reduce the size or scope of government. Programs such as health care and early childhood and K-12 education proved simply too popular to curb in any meaningful way. Today, state spending stands at double where it was in 1960, as a share of GDP. “Spending has slowed at times,” he said. “It’s just been more responsive to the strength of the economy than partisan control of government.”
Grossmann is skeptical that the current crisis, despite the pain of the moment, will end up making state governments look markedly different in 2025 or 2030 than they do today. What follows are edited excerpts from our conversation:
In your book, you argue that conservatives ultimately were unable to limit government’s growth. Do you think that can change now, given the startling budget shortfalls they’re facing?
I would expect a similar scenario to what played out during the last recession, that states will lose revenue and will have to make it up somehow. They’ll be more dependent on the federal government and that means all states, Democratic and Republican, will cut back. They tend to take lowest-common-denominator policies — hiring freezes and across the board cuts to departments and no pay raises for employees. Those things tend to happen before cutting programs that directly help individuals. That said, you can see the acceleration of trends in some areas that are already losing funding losing more — higher ed and criminal justice. 
A 20 percent drop in state revenue won’t mean a 20 percent drop in state expenditures, because there’ll be federal money flowing through the system. There is a ratcheting up. There’s a tradition of the federal government taking away money (after a crisis), but some of the money sticks around. The long-term trend is that the federal share of state expenditures continues to increase.
What do you think federal aid will look like? On Thursday, House Speaker Nancy Pelosi called for $1 trillion for state and local governments. Sen. John Cornyn, a Texas Republican, called that “a pretty outrageous number.” But assuming there ends up being significant aid, what effect would that have?
What happened last time, as you know, is that it sort of postponed the crisis. You got the stimulus funds, and that meant the state and local government recession happened a little bit later than the national recession. It’s fairly likely that will happen again. If you do see a lot of money coming into the states, that will not mean an expansion of government, it will mean the cliff comes later.
Maybe no expansion of government. But you’re saying, just as Republican majorities in recent years failed to shrink state governments, the coronavirus won’t do it, either.
When revenues drop because of an economic downturn, rather than a tax cut, it means that when the economy goes up again, revenue automatically goes up with it, without having to pass a tax increase. That’s historically where the conservative problem arises — when states get more money, they spend it. 
When the economy is doing better, state revenues increase. Even in Republican administrations, that usually does not translate into revenue cuts. It usually translates into more spending.
So, despite the enormous challenges states face today, you don’t think in the long run they’re going to be reshaped in any fundamental or enduring way by this crisis.
When you get this kind of a crisis and associated budget problems, it constrains the policy spectrum more than it expands it. To the extent that the states face budget problems and more dependence on the federal government, that historically has meant convergence toward common policies.
Big conservative ideas, like let’s redo social programs to encourage more work, now don’t seem very likely. Saying let’s redo education programs to encourage more choice may seem tone deaf in the face of schools, public, private and charter, all facing problems.
People on the left are saying that now that everyone realizes government is very important, we need more health care. That’s no more likely to happen than the conservative vision.
Alan Greenblatt is the editor of Governing. He can be found on Twitter at @AlanGreenblatt.
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