Senate Majority Leader Mitch McConnell on Wednesday opened the door to allowing U.S. states to file for bankruptcy to deal with economic losses stemming from the coronavirus outbreak that are punching big holes in their budgets.
McConnell said in a radio interview that Republicans would not support giving state and local governments more money in future coronavirus aid legislation, saying those funds could end up being used to bail out state pensions.
Speaking on Hugh Hewitt’s syndicated conservative talk radio show, McConnell said he instead “would certainly be in favor of allowing states to use the bankruptcy route.”
New Jersey Governor Phil Murphy blasted Senate Majority Leader Mitch McConnell for saying he favors allowing states struggling with high pension costs amid the burdens of the pandemic response to declare bankruptcy rather than giving them a federal bailout.
“I’m taken aback — my breath is taken away — I have almost nothing to say to what Senator Mitch McConnell of Kentucky said — that it wouldn’t necessarily be a bad idea for states to go bankrupt. It’s actually worked out pretty well for some cities over time. Really?” Murphy said Wednesday at a press briefing.
“Encouraging, engendering, explicitly almost hoping” for bankruptcy “is completely and utterly irresponsible,” he said, in a rare display of anger for the generally even-tempered governor.
States do not have the ability to declare bankruptcy under current law, and modifying the bankruptcy code would likely be a heavy lift in Congress.
The Senate on Tuesday passed a nearly $500 billion “interim” package that included additional funding for a popular small-business loan program, hospitals, and expanded coronavirus testing. During the negotiations, Democrats had demanded billions more for state and local governments, citing requests from Democratic and Republican governors alike.
McConnell’s office referred to such funding as “blue state bailouts” in a news release earlier Wednesday, further underscoring that there remains broad GOP opposition to such cash infusions. And McConnell himself said it was no surprise that governors, regardless of political party, “would love to have free money.”