Localities slow to spend COVID aid
22 states, DC haven’t OK’d distribution plans
The tone was urgent when eight governors and mayors visited the Oval Office in February: Please help us recover from the economic devastation left by COVID-19.
President Joe Biden called it a “crisis.” New York Gov. Andrew Cuomo described the needs as “critical.” Miami Mayor Francis Suarez said Florida cities were “crying out for help.”
Yet now that states, cities and towns across the U.S. have been wired $200 billion in emergency aid – one of the largest federal-to-local stimulus efforts in history – many are in less of a rush.
So far, just five of the eight politicians who visited the Oval Office on Feb. 12 to urge passage of the $1.9 trillion American Rescue Plan have decided how to spend more than a small share of the money. Four have designated all the money, including New York, which approved a budget committing all $12.7 billion to offset lost revenue and a budget shortfall. Some have allocated a tiny fraction, including Arkansas, which has set aside just $30 million of its nearly $1.6 billion, for rural broadband. Miami has touched none of it.
Twenty-two states and Washington, D.C., have yet to pass legislation or take executive action laying out how they will use the money, according to the National Conference of State Legislatures. Pleas for help have run headlong into the glacial pace of state and local governments, many of them bickering over executive versus legislative decisions and scouring hundreds of Treasury Department pages laying out allowable uses of the money.
That pace also reflects an unexpected reality: Many states rebounded faster than expected.
“I think you’re going to see that this money is going to move out very slowly,” said Arkansas Gov. Asa Hutchinson, a Republican who attended the February meeting. “I never sensed the urgency of this package; I know it was important for many other states.”
‘Give it back to the people’
As the bill was debated, Republicans in Congress slammed it as an unnecessary bailout and “liberal wish list” for cities and states. Ultimately, it passed without a single Republican vote.
Today, the Biden administration argues the money was never intended to be spent all at once.
“It is not a sign of money not needed because it’s not all going out at the beginning,” said Gene Sperling, who is overseeing the administration’s implementation of the plan. “This is designed to be both for immediate crisis responses as well as two- or three-year money. It is designed for people to do serious, transformative things and to help respond to challenges in the economy and bumps in the road, as there are in most recoveries.”
When state tax revenue tallies came out in June, the past year showed slight growth: about 1.4%, according to the National Association of State Budget Officers. Forecasts for the coming year are even rosier.
Still, the pandemic took a toll. Over the past two years, 40 states fell short of pre-pandemic revenue projections. More than 1 million jobs in state and local government were cut, according to the Treasury Department.
Suarez, who spoke of fiscal “agony” when he attended Biden’s meeting, was grappling last year with forecasts for a $25 million budget deficit. Instead, his city saw a $2 million shortfall. Miami will receive $138 million over two years under the American Rescue Plan.
Suarez, a Republican, plans to ask the City Council in September to approve using the money on affordable housing initiatives, broadband expansion, day care, gun violence awareness and parks.
“Almost all of it, we’re going to give it back to the people,” Suarez said in May.
Jeff Williams, then the mayor of Arlington, Texas, attended Biden’s meeting on behalf of the U.S. Conference of Mayors. In a February interview with USA TODAY, Williams, a Republican, likened the pandemic to a flood that would typically trigger federal emergency assistance with no questions asked.
His mayoral term ended last month, and, so far, Arlington has allocated only $6.1 million of its $81.5 million over two years – just over 7% – to fill police, firefighter and other positions that remained vacant after a pandemic hiring freeze, according to the newly elected mayor, Jim Ross. Despite the pandemic, Arlington last September cut property taxes for the fifth consecutive year.
Ross said “decisions have yet to be made” about the remaining money.
In recent weeks, the Biden administration made the rescue money a key plank of its response to rising gun violence, encouraging mayors to use their portions to hire police officers and improve public safety. The White House gave 28 examples of cities using or considering money for law enforcement.
White House press secretary Jen Psaki said last week that the administration is confident the relief money for cities and states is being well spent.
Money from Biden’s aid package does not have to be obligated until 2024 or spent until 2026, far more leeway than the one-year deadline to spend last year’s CARES Act funds. Unlike CARES Act dollars, reserved for coronavirus-related expenses, governors and mayors have broad latitude with this infusion.
The 50 states and Washington, D.C., will share $195 billion; counties, cities and towns will get $130 billion; an additional $24.5 billion will go to territories and tribal governments.
Now versus the future
Of the states that have settled on spending plans, uses include replacing lost revenue and replenishing unemployment funds, $10 million for seafood marketing in Alaska, and $50 million for beach and inlet restoration in Florida.
Critics say the lethargic rollout backs up concerns that the money wasn’t needed, carrying the risk of overheating the economy by distributing a flood of cash to states – and people – just as the economy was starting to rebound.
Money began flowing to states and cities in May. A second wave will go out in 10 months.
Many communities have a strategy to divide their efforts between rescue dollars that must be spent urgently and rebuild money for future investment, said Brad Whitehead, a nonresident senior fellow at the Brookings Institution.
“The bleeding isn’t as bad as we feared as far as straight-up urgency and the nightmare scenarios, so people want to be deliberate and smart,” Whitehead said.
Even though Biden’s rescue package got no GOP support in Congress, no Republican states or cities have rejected the money so far.
“You can’t hardly justify giving it back,” said Hutchinson, Arkansas’ governor, who attended the White House meeting as vice chairman of the National Governors Association and is now the organization’s chairman. The group had said direct funding was needed but did not take a formal position on the American Rescue Plan.
Political fights have gummed up many expenditure decisions.
After New Mexico Gov. Michelle Lujan Grisham attended Biden’s February meeting, she told reporters that her first-ever Oval Office visit reflected that “we’re in a federal emergency, both economically and still dealing with the public health component of the emergency with COVID.”
On her return from Washington, the Democrat found herself at odds with her state’s Republican-majority Legislature, which suggested using more than $1 billion to avoid future payroll tax increases on businesses.
Lujan Grisham vetoed that in April, setting off a tug of war. She did not respond to several requests for comment, but a fact sheet issued by the state indicates it will spend nearly 40% of its $1.75 billion to replenish and repay unemployment funds and for its vaccine lottery prizes.
Pat Woods, a Republican legislator, accused Lujan Grisham of being a “dictator who thinks she knows better than everyone . ... We have a great need for these dollars, and they’re not in the hands of the people that need them: our small businesses. How do you crank an economy back up?”
In Massachusetts, Republican Gov. Charlie Baker and the Democraticcontrolled Legislature have fought over the $5.3 billion in state rescue money, prompting the Legislature to seize control of the funds and place them in a separate account while it seeks public input.
Meanwhile, complex deal brokering has broken out in some cities.
Tempers have flared in Detroit, whose mayor, Mike Duggan, participated in Biden’s February meeting. He was ready to go with an early plan for how to use the money and distributed a framework in May. Duggan held 63 meetings with residents that drew 3,300 residents in all.
Battles with the Detroit City Council erupted, and 40 protesters showed up at Duggan’s home, postponing key decisions. Duggan took it in stride, saying he “valued the passionate conversations and feedback” and assuring residents that the dollars will be spent to “improve the lives of Detroiters and our neighborhoods.”
Recovery has been uneven
Nationwide, the economic outlook improved dramatically as social distancing guidelines eased and businesses reopened. But the recovery has been uneven, ranging from Alaska, which depends heavily on the oil industry – down 47% in tax collections during the first three months of 2021 compared with a year ago – to Michigan, up 60%.
Cities with the sharpest declines in tax revenue collection during the pandemic typically have spent their money the fastest, often using most of their aid to replace lost revenue and avoid cuts.
In Philadelphia, where revenue cratered last year, the city is using all its rescue money – $1.4 billion – to fill a $1.5 billion shortfall over the next five years.
“Without the money, we’d be cutting everything,” said Jim Kenney, the Democratic mayor of Philadelphia. “We may be laying off police.”
Some cities in financial trouble are nonetheless taking it slow.
Dayton, Ohio, saw tax revenue plummet nearly 10% during the pandemic. It’s still sitting on the first tranche of the $138 million it will get over two years.
“We know this is a big deal,” Mayor Nan Whaley said. “And so, blowing it all in the first two months, I think, is not a smart way to go.”