States should be able to pursue bankruptcy rather than relying further on the federal government during the coronavirus pandemic, and any federal assistance should not be spent on addressing pension underfunding, said Senate Majority Leader Mitch McConnell, R-Ky., Wednesday during a radio interview.

Radio host Hugh Hewitt asked whether Mr. McConnell would insist on reforms of state pension plans if states get more funding from the next COVID-19 assistance measure expected from Congress.

“There’s not going to be any desire on the Republican side to bail out state pensions by borrowing money from future generations,” Mr. McConnell. “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 program.”

Another relief bill passed the Senate on Tuesday, and is expected to be approved Thursday by the House. It has no new funding for state and local governments, which could be included in another one, an idea supported by both Treasury Secretary Steven Mnuchin and President Donald Trump. Mr. McConnell said during the radio interview that the idea will be discussed within the Senate Republican Conference, and that many states “have done it to themselves with their pension programs.”

Mr. Trump and many members of Congress on both sides of the aisle have endorsed a significant increase in infrastructure spending in the next relief measure.

The National Governors Association wrote congressional leaders Tuesday asking for $500 billion to help states replace lost revenue. States are not currently allowed to declare bankruptcy, so Congress would have to address that as well.

Governors and state legislators have opposed the bankruptcy option when Congress has raised it in the past. In a 2011 letter, NGA and National Conference of State Legislatures officials said “the mere discussion of legislation, let alone the existence of a law allowing states to declare bankruptcy would only serve to increase interest rates and create more volatility in bond markets.”

Source: Pensions & Investments