Treasury Secretary: Federal Government Won’t Bail out ‘Mismanaged’ States

Treasury Secretary Steven Mnuchin in the Oval Office of the White House in Washington on April 24, 2020. Olivier Douliery/AFP via Getty Images

The federal funds being sent to states to help deal with the COVID-19 pandemic shouldn’t be used on matters unrelated to the pandemic, Treasury Secretary Steven Mnuchin said.

COVID-19 is a disease caused by the CCP (Chinese Communist Party) virus, a novel coronavirus from China.

The $150 billion approved by Congress in legislation signed by President Donald Trump is being sent to states to cover CCP virus-related expenses, Mnuchin said during an interview on CNBC’s “Squawk Box.”

“We’ve been clear that to the extent people have to use police to enforce coronavirus issues, public safety, things like that, that they could allocate that money to the coronavirus issues, but that this was not about lost revenues and that’s the way the bill was written,” he said.

“This isn’t just going to be a federal bailout of the states,” he added later. “This shouldn’t be a bailout of states that were mismanaged because of the coronavirus.”

Mnuchin has spoken with many governors, including New Jersey Gov. Phil Murphy, about funding.

New Jersey Gov. Phil Murphy visits an alternate care facility at New Bridge Bergen Medical Center in Paramus, N.J., on April 22, 2020. Michael Karas/The Record via AP, Pool

Facing financial shortages, some governors have pressed for additional funds from the federal government, including New York Gov. Andrew Cuomo and Murphy.

“Our costs are going up serving folks who have lost their jobs, small businesses that have been crushed, folks who are in the healthcare system etc.,” Murphy said on the same show this week.

The National Governors Association, headed by Maryland Gov. Larry Hogan, has asked for $500 billion to replace revenue lost from shuttered businesses and millions of unemployed workers.

Some governors have said rules on using the funds already approved are too restrictive and might force them to return some of the money.

Top congressional Democrats have said they support additional federal funding to states, warning of massive layoffs if the money isn’t approved.

A gallon of milk is offered as volunteers help distribute food as vehicles arrive at a Los Angeles Regional Food Bank drive-through giveaway in Pico Rivera, California, on April 28, 2020. Frederic J. Brown/AFP via Getty Images

However, Senate Majority Leader Mitch McConnell (R-Ky.) has said some states could declare bankruptcy if they’re facing shortfalls. Current law prohibits states from declaring bankruptcy.

In talks with Democrats, Republicans will push to make sure money sent to states isn’t used to address past problems.

“We’ll certainly insist that anything we’d borrow to send down to the states is not spent on solving problems that they created for themselves over the years with their pension programs,” McConnell said.

Mnuchin, a key point person for negotiations of virus-related packages, said discussions are ongoing concerning possible additional funding.

“States that had specifically large expenses because of the coronavirus, like New York and New Jersey, I think it was the right thing that the federal government gave them money,” he added.