Covid Aid Helped California to $97.5B Surplus

As Covid continues to wane in the U.S., the effects of the trillions of dollars in Covid spending are manifesting. While some of the funds were needed to weather the pandemic, others let states pad their bank accounts. In California, Gov. Gavin Newsom announced the state has a $97.5 billion surplus, according to NBC News.

Newsom and others have attributed the surplus to rising income tax revenue. But for the past two years, states have seen exorbitant amounts of federal funds come in thanks to Covid relief.

In 2020, the CARES Act sent California $15.3 billion, which was spent on everything from education to healthcare to temporary welfare programs. Then, in 2021, the American Rescue Plan sent California and its municipalities an additional $42.6 billion. The Consolidated Appropriations Act of 2021 sent another $6.7 billion. This list of $64.6 billion isn’t exhaustive of all federal money flowing to states during the pandemic.

All of this aid came at a time when state revenues across the U.S. were “virtually flat” compared to pre-pandemic, with JPMorgan finding revenues dropped 0.12 percent from 2019 to 2020, according to Fox News.

These direct payments to states have disproportionately benefited blue states, since most are based on population. In the case of the American Rescue Plan, the apportionment was calculated based on unemployment, so blue states with big cities and high unemployment also made out with the most cash.

Fiscally irresponsible states like New York, Illinois and California, all in the top six of states with the highest debt per capita, shouldn’t be bailed out by the federal government in times of crisis. The moral hazard created by this precedent will only encourage states to spend more irresponsibly, knowing the federal government will protect them.  

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