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The U.S. Senate will begin debate next week on a fifth coronavirus-response bill, Senate Majority Leader Mitch McConnell (R-Ky.) said yesterday, as he forecast tough negotiations with Democrats who are seeking broader aid than Republicans, Reuters reported. McConnell added the legislation, which has not yet been unveiled, will likely be more contentious than the previous four coronavirus aid bills. Those pumped more than $3 trillion into the hobbled economy with a combination of business loans, expanded unemployment benefits for workers and direct payments to families. “I do think we’ll get there and do something that needs to be done” before Congress begins an August recess, the Republican senator predicted. But there are also divisions among Republicans — in the White House and in Congress — over the precise direction of the upcoming bill, including whether there should be another round of direct payments to individuals and families. McConnell has talked about a bill costing no more than $1 trillion, while Democrats in the House of Representatives passed a $3 trillion measure in mid-May that McConnell has so far ignored. McConnell wants to focus on liability protections for business, schools and other entities as they reopen their operations even as coronavirus cases surge in many parts of the U.S., including Kentucky.

A surge in coronavirus cases threatens to arrest the country’s early economic recovery, leaving Texas and other hard-hit states staring down another round of massive revenue losses that could imperil their budgets, the Washington Post reported. The new infections, particularly in parts of the South, have left some state leaders no choice but to begin reclosing some businesses and encouraging residents to stay home once again. Much as the shutdowns this spring slowed consumer spending to a trickle, these efforts to stave off the pandemic could deliver a second financial blow to local governments already struggling to salvage their economies while protecting public health. The stakes have been on display in Texas, which witnessed a $650 million drop in tax revenue collected in June, according to data released on Wednesday by state budget officials, which includes sales mostly made in May. Texas leaders attributed the decline to consumers shelling out less for cars, gasoline, alcohol and other goods, as well as precipitous drops in travel and tourism, compared with the same period a year earlier. No state has been untouched by the coronavirus pandemic, which this spring brought commerce to a halt and cleaved massive holes in local governments’ budgets. But Texas had been considered one of the healthier states entering 2020, flush with a robust reserve of cash to help it weather an economic downturn.

Cash-starved cities and states across the country are starting to weigh whether to raise taxes on homes, cigarettes, local businesses and global tech giants, hoping to rake in new revenue that might help them close the massive budget shortfalls created by the coronavirus pandemic, the Washington Post reported. The increases that have been proposed — and in some cases adopted — reflect growing desperation on the part of government leaders nationwide. Many have found that recent spending cuts, furloughs and layoffs have not been enough to shore up their sagging finances, forcing them to consider more politically noxious and economically risky moves in the middle of an economic crisis. Philadelphia increased fees on parking and raised wage taxes on workers who reside outside the city. Chicago Mayor Lori Lightfoot (D) said this month she could not rule out a property tax increase to cover her city’s $700 million budget shortfall. From New York to Seattle, other states and municipalities have considered a wide array of prospective rate hikes in response to major drops in once-reliable sources of income — and months of failed attempts to get Congress to authorize more federal aid. Nashville leaders even took the eye-popping step in June to increase property taxes by about 34 percent, a move meant to help pay down rising public education costs — and one that quickly sparked a public outcry. The city’s rates had long been historically low, according to Bob Mendes, an at-large member of the Nashville Metro Council who helped craft the budget blueprint. An increase helped pave the way for the city to close an anticipated $216 million financial hole in the 2021 fiscal year without severely hamstringing much-needed public services, he said.

New York City Mayor Bill de Blasio (D) said that the city could lay off or furlough up to 22,000 employees in the fall as it faces a $9 billion budget shortfall from the coronavirus, the Wall Street Journal reported. Looking to cut another $1 billion from the budget, de Blasio said that the staffing reductions would happen in the fall and be across every city agency, including his own office. There are currently more than 326,000 city employees, according to the Citizens’ Budget Commission. Mr. de Blasio has warned about the “bleak reality” of the city’s financial crisis since the coronavirus hit, but Wednesday was the first time he put a number to possible staff cuts in the fiscal year beginning July 1. To avoid layoffs, the mayor said that he would first try to find the savings in discussions with the labor unions that represent city employees. The city could negotiate some concessions within the contracts, he said. “We are running out of options here,” he added, calling layoffs and furloughs a “last resort.”

More than 700 U.S. cities have halted plans to improve roadways, buy new equipment and complete a wide array of upgrades to water systems and other critical infrastructure, as government officials slash spending to shore up the massive holes in their budgets created by the coronavirus, the Washington Post reported. The decision to suspend or terminate some of these long-planned purchases, upgrades and repairs threatens to worsen municipal services and harm local businesses, according to the National League of Cities, which deduced from a new survey released today that more federal aid is necessary to ensure that local financial woes do not imperil the country’s economic recovery. Cities had already predicted they would need about $500 billion from Washington to help cover the massive, unanticipated declines in tax revenue and other costs incurred from the pandemic, which has shuttered businesses and left millions of Americans out of work. But federal lawmakers have been unwilling to authorize such a cash infusion, forcing many cities to take drastic steps to balance their budgets for fiscal 2021, which for many governments begins on July 1.

When it comes to Illinois bonds, Citigroup Inc. says the worst-case-scenario has already been priced in, Bloomberg News reported. The difference between the yields on the state’s debt and top-rated securities — a key measure of risk — widened to a record high in May on speculation that the financial hit from the coronavirus will make it the first state to see its credit rating cut to junk. That selloff pushed its yields to junk-bond levels, surpassing those on some debt issued by still bankrupt Puerto Rico. But Citigroup analysts Vikram Rai, Jack Muller and Vedanta Goenka said in a note to clients Monday that a default like Puerto Rico’s is not a risk since the state has many ways to contend with its tax shortfalls. That includes borrowing from the Federal Reserve’s municipal lending facility, as it did last week. The analysts’ comments reflect greater optimism on Wall Street as much of the nation begins to reopen, even though record unemployment and business shutdowns are leaving governments facing massive budget shortfalls.

New Jersey Governor Phil Murphy (D) said that the state may have to cut half of its 400,000 public employees if the federal government doesn’t help make up a $10.1 billion revenue shortage through June 2021, Bloomberg News reported. “I don’t think there’s any amount of cuts or any amount of taxes that begins to fill the hole,” said Murphy, a retired Goldman Sachs Group Inc. senior director and Democrat who came to office in January 2018. Without federal help, he said, state and local governments will have to dismiss firefighters, police, emergency-medical personnel and others. “The alternative to not getting that funding is a whole lot of layoffs — we think as much as 200,000 or more,” he said. Last week his administration listed more than $5 billion in cuts and deferrals to address the expected $10.1 billion revenue shortage — the fallout from a shutdown he ordered on March 21 to slow the spread of the new coronavirus. Murphy is seeking to issue billions of dollars in short- and long-term debt, including via the U.S. Federal Reserve’s Municipal Liquidity Facility.

A grim economic outlook has forced top New York City officials to contemplate a maneuver that has been inconceivable ever since it brought New York to disrepair and the brink of bankruptcy in the 1970s: allowing the city to borrow billions of dollars to pay for its basic operating expenses, the New York Times reported. More than 900,000 people have lost their jobs since February, and thousands of businesses have closed. The streets remain empty of workers and visitors: Nearly 117,000 people filed new unemployment claims in the second week of May, a staggering 2,206 percent increase from the previous year. Tourism, which generates roughly $70 billion a year in economic activity, has disappeared. The real estate market is stagnant; sales are projected to be down by a third. People are not spending money; sales tax revenue is expected to drop by $1 billion — part of an anticipated $9 billion shortfall in city tax revenue that could force drastic cuts to essential city services. In the face of these challenges, numerous fiscal experts and public officials, including Gov. Andrew M. Cuomo, are leery of giving the city permission to solve its budget problems by taking on significant debt, sensitive to the reckless borrowing that began more than 50 years ago under Mayor Robert F. Wagner and accelerated under the city’s next two mayors, John V. Lindsay and Abraham D. Beame. The shortsighted economic strategy — Mr. Wagner blithely called it a “borrow now, repay later” philosophy — was one reason New York City reached the brink of bankruptcy in 1975, leading to the creation of the New York State Financial Control Board, which was given broad oversight of the city’s financial management. Mayor Bill de Blasio, who has asked legislative leaders to grant him permission to issue bonds to cover the city’s operating costs, has said he would only do so as a “last resort.”

Analysts said that high borrowing costs will limit participation in a $500 billion U.S. Federal Reserve short-term borrowing program set up to address state and city revenue shortfalls due to the economic fallout from the coronavirus outbreak, Reuters reported. While Illinois, the lowest-rated U.S. state at a notch above junk, passed a bill late last week authorizing borrowing up to $5 billion through the Fed’s municipal liquidity facility (MLF), legislation is pending in few other states. Cooper Howard, director of fixed-income strategy at the Schwab Center for Financial Research, said sample purchase rates released by the New York Federal Reserve on Wednesday are much heftier than what highly rated governments can obtain in the U.S. municipal market. The Fed “wants to be the lender of last resort,” he said, adding that for lower-rated issuers like Illinois, the program makes more sense. Sample rates for issuers rated BBB-minus or Baa3 like Illinois would range from 3.84 percent for a one-year loan to 3.85 percent for a three-year loan, according to the Fed. That is lower than the current 400 to 411 basis-point spread over Municipal Market Data’s benchmark triple-A yield scale for Illinois bonds with maturities from 2021 through 2023.