City officials call for flexibility in how federal relief aid can be spent.
As budget deficit looms, officials lobbying Congress to loosen CARES Act restrictions
As the prospect of mass furloughs and severe spending cuts looms over the city’s next budget, Houston officials are sitting on a pile of coronavirus stimulus money that amounts to more than double the shortfall projected by Mayor Sylvester Turner.
The rub, at least for now, is that the strings attached to the $404 million Houston received from the so-called Coronavirus Relief Fund — a $150 billion trove sent to states and local governments as part of the roughly $2 trillion Coronavirus Aid, Relief and Economic Security Act — bar officials from spending the aid on expenses they already had budgeted.
Mayors, governors from both parties, congressional Democrats and even some Senate Republicans have pushed for looser restrictions that would allow sales tax-deprived governments to use the money to plug budget holes, instead of limiting them to expenses tied directly to the pandemic.
Meanwhile, as Congress weighs a second stimulus package for local and state governments that may earmark funds for lost revenue after all, Turner is under pressure to squeeze as much money as possible out of the initial round of CARES Act aid.
Prompting the tension was the Treasury Department’s April 22 guidance that eligible spending includes payroll expenses for public safety, public health, health care and other employees “whose services are substantially dedicated to mitigating or responding” to the pandemic.
Last week, City Controller Chris Brown penned a letter to Finance Director Tantri Emo and Turner-appointed COVID-19 recovery czar Marvin Odum in which he urged the administration to craft a spending plan for the funds. He told city council members last week that officials in other Texas cities have begun determining how much of their public safety expenses are directly related to COVID-19.
“The potential exists for these costs to be offset by CARES Act funds, which could help alleviate added pressure placed on the General Fund,” Brown wrote, refer
ring to the city’s $2.5 billion taxsupported fund that pays for most day-to-day core operations, including public safety, trash pickup, parks and libraries.
Turner, who has asked federal lawmakers to allow more flexible use of the aid, said CARES Act funds may only cover public safety expenses stemming from overtime that is “specifically related to COVID-19” and was not already budgeted.
The mayor’s interpretation is far narrower than that of Houston firefighters union president Marty Lancton. At a city council budget committee meeting last week, Lancton read from a letter sent by a top official from the International Association of Fire Fighters who argued that the CARES Act covers “any operations performed by fire department personnel” since March 1.
Lancton contended that COVID-19 has affected the fire department’s operations across the board, even when firefighters are not responding to coronavirus-related calls, by upending protocols and forcing firefighters into quarantine even if they did not come into direct contact with an infected patient.
Turner spokeswoman Mary Benton acknowledged that the federal government left “a very gray area” in defining what is “specifically related to COVID-19,” though she reiterated the mayor’s stance on how the city can spend the money.
“That’s why the city needs maximum flexibility,” Benton said. “… The US Conference of Mayors has been fiercely advocating for this flexibility, and as a member of the advisory board, Mayor Turner has been actively involved in both those discussions and follow-up advocacy.”
Turner also has asked Republican Sens. John Cornyn and Ted Cruz to help loosen restrictions on the CARES Act funds. On Thursday, however, Cruz and four other Republican senators signed a letter to President Trump in which they wrote: “We believe additional money sent to the states for ‘lost revenue’ or without appropriate safeguards will be used to bail out unfunded pensions, reward decades of state mismanagement, and incentivize states to become more reliant on federal taxpayers.”
Meanwhile, Cornyn balked last Thursday at a $1 trillion spending figure floated by House Speaker Nancy Pelosi, D-Calif., for the next aid package. However, he said he is behind the idea of allowing governments to use the $150 billion to replace revenue lost during the pandemic.
“I think that’s related to the coronavirus, and I would favor giving them flexibility,” Cornyn said, according to multiple reports.
The city must return whatever funds it fails to spend by the end of the year. Houston finance department officials did not respond to an inquiry about how much the city already has spent on personal protective equipment, drive-thru testing sites and other eligible expenses, though Benton said the mayor has instructed all department directors to track spending related to COVID-19. The federal funds also would back a proposed city rental assistance program.
Brown, in his letter to Emo and Odum, said those collective costs will not exceed the city’s $404 million allotment. The controller is expected at Wednesday’s city council meeting to report the city’s March sales tax revenue, the first true picture of the pandemic’s impact on the city budget. Brown and Emo both have projected a $23 million loss in March sales tax revenue; April is expected to be far worse, as major restrictions on public gatherings began partway through March.
Turner has projected a dire image of the city’s finances, warning that the budget for the fiscal year that begins in July will require thousands of furloughs and major deferred payments, and will “be the worst budget that the city will deal with in its history.” Lancton said the CARES Act already provides the city with “a great opportunity to reinforce firefighters and paramedics on the front lines of the pandemic response — without the divisive politics and rancor we too often face at City Hall.”