During the initial hours of the second day of the Nevada Legislature’s 31st Special Session, lawmakers heard additional testimony from state health leaders on just how severe Governor Steve Sisolak’s (D) proposed budget cuts will be. And just before their hearing began, I heard from a couple of the nation’s top economists on what the federal government can and should do to help Nevada and the rest of the nation avoid the kind of economic catastrophe that we may be beginning to witness in Carson City right now.
“If you look at why GDP fell last quarter, it’s because of consumer spending. The fundamental reason is that consumers are spending less.”
– Raj Chetty, Harvard University
Before we zoom into what’s happening inside the Nevada Legislature, let’s zoom out and talk about the Zoom call I watched this morning. The Center on Budget and Policy Priorities (CBPP) held a very special Zoom event with famed economists Raj Chetty (Harvard University’s Department of Economics) and Mark Zandi (Moody’s Analytics). Let’s just say that if you’ve been following our reports here regularly, and especially if you regularly read David Dayen’s fantastic economics reporting at The American Prospect (and you should!), you probably already have a good idea of what Chetty and Zandi had to say.
Nonetheless, for everyone who needs an additional reminder, Zandi made this crystal clear: “The rapid reopenings have also reignited the virus. Now the pandemic is raging across the country, forcing states to backtrack.” Zandi then went on to explain that while state governments’ (including Nevada’s) decisions to reopen over the past two-and-a-half months have provided a temporary economic boost, it’s not sustainable because those reopenings did not coincide with sufficient federal action to contain the SARS-CoV-2 coronavirus.
And while Zandi, Chetty, and CBPP President Robert Greenstein lauded some of the CARES Act and Families First Act programs, such as the expansion of unemployment aid and SNAP benefits, for delivering needed aid, they criticized the inclusion of items like the Paycheck Protection Program (PPP) and the U.S. Treasury’s corporate bailout program that provided little or no economic boost. As Chetty pointed out, “If you look at why GDP [or the national gross domestic product] fell last quarter, it’s because of consumer spending. The fundamental reason is that consumers are spending less.”
Chetty then pointed to recent economic statistics from Colorado and New Mexico, two neighboring states that diverged on reopening schedules, with Colorado beginning to reopen in early May and New Mexico reopening more slowly. As Chetty explained, “Even though Colorado reopened two weeks earlier than New Mexico, there’s no discernable difference in consumer spending. It’s not about states’ decisions to reopen. It’s about consumers’ decisions to go out and risk their own safety.”
“The [state] budget problems get even more difficult going forward [without federal aid] because the economy doesn’t look like it will be going back to where it was any time soon.”
– Mark Zandi, Moody’s Analytics
So in other words, rapid reopening without sufficient action to stop further spread of COVID-19 has been no “magic bullet”. Instead Chetty, Zandi, and Greenstein all called for a new federal relief package to extend programs (like unemployment assistance and SNAP expansion) that work and skip programs (like PPP, “risk corridor” subsidies for health insurance companies, and “shovel ready” infrastructure funding) that won’t provide any immediate stimulus.
And when it comes to something that folks inside the Nevada Legislature are particularly hoping will happen, all three economic experts called for more federal aid for state and local governments. As Zandi explained, “If there is no more support, we will probably lose another 1.5 million workers in this sector.” He then added, “The [state] budget problems get even more difficult going forward [without federal aid] because the economy doesn’t look like it will be going back to where it was [pre-pandemic] any time soon.”
So while the chatter in Washington is focusing on another round of “corona checks” and programs like “back to work bonuses” and “shovel ready infrastructure” that provide limited stimulative effect, Nevada and the rest of the nation need a more robust social safety net and direct relief to state and local authorities far more urgently. But unless and until the federal government steps up, the Nevada Legislature instead looks set to pass a massive round of budget cuts that will deliver harsh blows to the state’s social safety net during an active pandemic.
“I’m not presenting these [cuts] with any assumption that they’ll do any good thing. […] It’s hard. I feel like I can’t defend any of these like I defend adding a new program.”
– Richard Whitley, Nevada Department of Health of Human Services
During the Assembly’s Committee of the Whole (where all Assembly Members can participate in the same hearing), Nevada Department of Health and Human Services Director Richard Whitley summed it up this way: “We’re faced with reducing a lot of services while having to deliver more services at the same time.”
When asked by Assembly Members Dina Neal (D-Las Vegas) and Robin Titus (R-Wellington) about Governor Steve Sisolak’s proposed cuts to family planning programs that had just been boosted last year, Whitley responded, “I’m not presenting these [cuts] with any assumption that they’ll do any good thing. […] It’s hard. I feel like I can’t defend any of these like I defend adding a new program.”
Whitley went on to explain how federal assistance via targeted CARES Act funds and the Families First Act’s boost in the Medicaid FMAP have provided some additional funds for the state, but they’re not enough to make up for the state’s massive loss of income and rise in health care expenses over the last four months.
“The long-term cost is much, much more.”
– Assembly Member Maggie Carlton
As we’ve been noting here this week, and as April Corbin Girbus goes into further detail in the Nevada Current, there are many more health care program cuts on the table (as in, $137 million in cuts for “optional” Medicaid services). A little while after a constituent railed against proposed cuts to programs assisting Nevadans with disabilities during public comment, Whitley lamented, “It’s hard to pick any one service. The federal government has ‘mandatory’ and ‘optional’ services, and ‘optional’ is the worst term. For amputees, prosthetic limbs are not ‘optional’.”
And yet, amputee services are on the chopping block, along with a cap on future enrollment to autism support services and senior in-home assistance services. As Assembly Ways and Means Committee Chair Maggie Carlton (D-Las Vegas) lamented, “We remember when there was almost no treatment for people with autism. We worked to get them more treatment.” Then as she noted how speech therapy and motor skills training help students with autism succeed in school, Carlton warned, “The long-term cost is much, much more than the $5.7 million [proposed cut for autism support services].”
As the Assembly’s hearing continued, lawmakers discussed additional long-term costs to these proposed cuts to disability support services. While Assembly Member Sandra Jauregui (D-Henderson) warned of the state possibly running afoul of the U.S. Supreme Court’s Olmstead v. L.C. 1999 decision that established that Americans with disabilities have the right to access in-home services and community programs in order to avoid institutionalization, Assembly Member Teresa Benitez-Thompson (D-Reno) countered that the greater risk lies in people not getting sufficient assistance.
“We are going to be losing a lot more than we are going to be saving, and we are going to be hurting our constituents.”
– Assembly Member Maggie Carlton
When it comes to any potential action to avoid some or all of these proposed budget cuts (absent immediate federal aid), the Nevada Legislature and the Governor’s Office remain stuck in neutral. While the Nevada Legislature’s Democratic leaders seem to be suggesting that they’re laying out all the grisly details of Sisolak’s proposed budget cuts before working out a potential package of tax hikes, State Senator Ben Kieckhefer (R-Reno) has been suggesting to multiple media outlets that Democratic leaders have not (yet?) reached out to him regarding a possible tax deal to avoid such severe cuts.
Meanwhile all other Senate Republicans, including fellow Reno moderate Heidi Seevers Gansert (R-Reno), have generally indicated that any and all tax increases are off the table on their end. Absent at least one Republican Senator voting for such a tax deal, Democrats lack the votes to pass it on their own. Yet at the same time, progressive groups like PLAN and Battle Born Progress have been calling into question whether Democratic leaders are bringing to the table all available options, such as repeal of mining tax deductions and clawing back corporate tax subsidies.
As the Assembly hearing went on and touched upon more of Sisolak’s proposed health care cuts, Carlton warned, “We are going to be losing a lot more than we are going to be saving, and we are going to be hurting our constituents.” And later on, Carlton sounded the alarms on how the state will continue to keep up with our growing Medicaid caseload absent additional state and/or federal dollars (even with the Families First Act’s temporary FMAP boost in place). Yet unless federal and/or state legislative leaders change course soon, Nevadans will soon find out just how much they will be losing and hurting.