Unspent municipal relief a sticking point for more

WASHINGTON — Last week, Pittsburgh Mayor Bill Peduto lamented that the city could face a $100 million shortfall this year due to falling tax revenue amid the COVID-19 pandemic that has shuttered businesses and ground tourism to a halt for several months.

Mr. Peduto did not mention that, as of June 30, Allegheny County reported spending just 6% of the $212 million it was provided under the CARES Act, according to a U.S.

Treasury Department report that circulated late last month. That money is budgeted in broad categories, according to county documents, for services, operations, personnel and equipment.

There won’t be a broad economic recovery, Mr. Peduto said, “if our cities are left to die.”

The comment was a pointed jab at Congress, which ended another week without a deal on another $1 trillion-plus economic relief package as the health crisis continues to roil local economies across the country. Senate Republicans and

House Democrats have been far apart on funding levels, with Democrats supporting a $3.3 trillion package and Republicans favoring a $1 trillion bill.

Local governments’ pace of spending federal dollars approved in March has emerged as a point of contention in the talks.

Republicans like Sen. Pat Toomey, R-Pa., have opposed new funding by calling out local governments for still sitting on the bulk of the cash from the first relief package, the Coronavirus Aid, Relief, and Economic Security Act, or

CARES Act.

Last week, Mr. Peduto, joining mayors from six other cities on a conference call assembled by the National League of Cities and U.S. Conference of Mayors, said Pittsburgh faces a year-over-year revenue drop as high as 20%, or $100 million less. Parking and amusement taxes have dried up almost completely, he said.

Local governments and Democrats in Congress have insisted they know more money will be

needed, on top of the current funding, because the pandemic has left local budgets with gaping shortfalls.

They say the CARES Act money was not issued until late April, and federal guidance on how to properly spend it was not finalized until June 30. Further, a provision in the CARES Act prohibited local governments from using the money to replace lost tax revenue.

When Allegheny County received the funds, “it had to create a plan for expenditures which included a pretty detailed review of the 200+ page bill to ensure that everything was being done correctly,” Amie Downs, the county’s director of communications, wrote in an email. “That was not a quick, or easy process.”

Allegheny County, according to documents provided by Ms. Downs, has budgeted $150 million for services; $36 million for operations; $16 million for personnel; and $11 million for equipment. Ms. Downs did not respond with a more detailed breakdown of where that money will go, so it’s unclear how much of Pittsburgh’s expenses could qualify and how much more is needed.

The calls for more funding came almost immediately after the CARES Act was signed into law on March 27. The law established the Coronavirus

Relief Fund to supply $150 billion in direct aid for state and local governments.

The direct aid was restricted to cover expenses directly connected to the public health emergency. A city could not spend funds, for example, on payroll for employees whose work duties are “not substantially dedicated to mitigating or responding to the COVID-19 public health emergency,” according to the U.S. Treasury Department’s guidance on the law.

In many cities and towns, officials said it became clear through April — and during phased reopenings in May and June as many places saw a resurgence of the virus — that they would need more dollars and more flexible spending guidelines than what was contemplated by lawmakers in March. In Johnstown, year-over-year tax revenues fell by $1.4 million in April and May — almost 10% of the city’s annual budget.

Mayors and state officials mobilized through lobbying organizations to hold media conference calls to explain that the COVID-19 financial pain has hit both sides of the balance sheet.

A survey by the National Association of Counties found county governments face $30 billion in increased costs with $114 billion in revenue losses. As a result, the association found, 71% of counties have cut or delayed capital investments and 68% have cut or delayed services.

While tax revenue falls, counties have purchased personal protective equipment for their 3.6 million employees — as well as arranging masks and supplies for reopening businesses and schools, said Matthew Chase, the association’s executive director.

“We’ve been so disappointed that additional federal aid for state and local governments has been viewed through a partisan lens,” Mr. Chase said in a call with reporters on Wednesday. “We are the practical level of government. We are literally on the front lines.”

A proposal from Senate Republicans, called the HEALS Act, proposes no new direct funding for state and local governments. Instead, it relaxes restrictions on local governments on spending existing federal funds, including the ban on using CARES Act money to fill tax revenue shortfalls. The proposal also allows governments to spend CARES Act funds up until 90 days after the end of fiscal year 2021.

Sitting on $1 billion

Mr. Toomey, in a statement this week, pointed to the fact that Pennsylvania officials have not allocated more than 20% of the CARES Act money provided by Congress.

“Pennsylvania is still sitting on over $1 billion, and large counties like Allegheny have spent a fraction of what was directly given to them by the federal government,” Mr. Toomey said. “Every dollar that was spent through the CARES Act was either borrowed or printed. Before Congress spends even more money it doesn’t actually have, states and counties should allocate their existing allotments so we can thoughtfully determine what needs remain.”

Meanwhile, House Democrats have stood behind their relief package passed in May, called the HEROES Act, which pledged $915 billion more in direct aid for state and local governments.

The counties association insisted that, by and large, more is needed.

Mr. Chase, of the counties association, said Wednesday he was more optimistic that there would be a deal between the House and Senate that would include additional funding.

“We’ve been pounding the message that the best way to provide direct economic aid to every inch of this country is to invest in county governments,” Mr. Chase said. “And I think that is starting to hit home on Capitol Hill.”