The $2 trillion stimulus bill Congress approved at the end of March included $111 billion for states, $22.5 billion for major counties and $5 billion for big cities.
Many cities and counties didn’t get a dime.
That’s because only cities and counties with populations larger than 500,000 were eligible for direct infusions of cash. That criteria excluded about 95% of the nation’s more than 3,000 counties, according to Teryn Zmuda, chief economist for the National Association of Counties.
And while some states, such as Washington and Alabama, are taking steps to pass some of the money along to smaller municipalities, only 36 cities across the country are large enough to be eligible for direct funding, said Mike Wallace, a legislative director at the National League of Cities, which represents the 19,000 cities, villages and towns in the United States.
Twenty-seven states don’t even have a city with more than 500,000 residents, Wallace said.
Now that Congress is considering another coronavirus relief package, the National League of Cities wants $500 billion funneled right to municipal and county governments small and large. The funding could be made available over a few years to stabilize operations, increase services and provide long-term stability.
“Every city has been impacted by this, and their revenues are going to be down,” Wallace said. “It’s possible for the federal government to allocate money to every local government, regardless of size. That’s what we’re asking Congress to do.”
The association of counties agrees that all local governments need help. It has joined with the league and the U.S. Conference of Mayors in requesting $250 billion from Congress in flexible and direct funding for local governments to address the fiscal challenges related to the pandemic. (The National League of Cities' $500 billion request includes that $250 billion.)
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The hit to county budgets could exceed $144 billion through the next fiscal year, the association projects.
“We are hopeful the next package will include direct and flexible funding for county government,” said Paul Guequierre, the association’s spokesperson. “We are working in bipartisan fashion with legislators on both sides of the aisle.”
The National Governors Association also is asking Congress to send $500 billion straight to states.
Both local and state governments are pushing hard for the additional cash infusion to make up for the enormous amount of revenue they’re losing while many are spending big on health care, emergency response and aid to affected residents.
The money from the $2 trillion stimulus package, called the CARES Act, can only be used for expenses incurred dealing with the pandemic and costs that weren’t in governments’ budgets. That means they are prohibited from using it to make up for revenue shortfalls, which officials say is a major flaw.
In some states, local governments that might want to increase revenue by raising taxes or adopting new ones aren’t able to because their states have limited their local taxing power.
“Some states have systematically constrained local governments’ ability to raise their own revenues because of preemption,” Wallace said. “That’s another reason direct federal aid is so necessary.”
And without congressional help, the unemployment crisis will get much worse because lots of government employees will be out of work, said Richard Briffault, a professor at Columbia University Law School who specializes in state and local government law.
“The last thing you want now,” he said, “is to force more unemployment by creating a fiscal situation where states and cities must lay off workers because they don’t have enough money.”
Layoffs and Budget Cuts
States, cities and counties already have begun to slash budgets and furlough or lay off employees.
In Washington state, Democratic Gov. Jay Inslee used his line-item veto to chop $235 million from the current supplemental operating budget. In Missouri, Republican Gov. Mike Parson cut about $80 million in funding to the state’s public universities and community colleges. And Democratic Gov. Gretchen Whitmer of Michigan “temporarily laid off” about 3,025 state workers.
Many cities and counties, reliant on vanished revenue from sales taxes, business licenses, fees and permits, face the same hard decisions.
An estimated 300,000 to 1 million municipal workers could soon be laid off or furloughed across the nation, according to the National League of Cities, which extrapolated data from cities and towns that have announced workforce cuts.
Among them is Louisville, Kentucky, which furloughed 380 school crossing guards and public library staffers.
Norfolk, Virginia, officials furloughed 550 part-time workers, most from the city’s parks and libraries.
Portsmouth, New Hampshire, officials laid off 87 part-time staffers from public works, libraries and recreation.
And Yukon, Oklahoma, laid off 18 full-time employees from seven departments.
Counties also were hit hard. They employ first responders and run more than 1,900 local public health departments, said Zmuda of the National Association of Counties.
“There has been a lot of demand on the services county governments provide,” Zmuda said. “With that human need, there’s a significant cost. Our county budgets have been strained.”
At least 35 counties have had to lay off or furlough employees, according to Zmuda.
They include Franklin County, Pennsylvania, in the state’s south-central region, which furloughed 25% or about 2,000 of its 8,000 employees, and Johnson County, Kansas, a suburb of Kansas City that furloughed 264 workers, many from parks and recreation and libraries.
Some counties also are cutting programs that aren’t essential health and safety functions, such as those focused on economic development and capital projects, Zmuda said.
“Many counties have rainy-day funds to prepare for natural disasters and emergencies and crises,” she said. “But we’re hearing from counties that have robust emergency funds that those funds already are running dry.”
Capitol Hill Prospects
Lawmakers on Capitol Hill are taking notice. Republican U.S. Sen. Bill Cassidy, of Louisiana, and Democratic U.S. Sen. Bob Menendez, of New Jersey, plan to introduce a bipartisan bill that would provide $500 billion in federal aid to state and local governments, territories and the District of Columbia.
A third of the money would be based on population size, another third on the number of COVID-19 cases relative to the population and the remaining third on revenue losses governments experienced because of the restrictions. It would expand eligibility to include counties and towns with populations of 50,000 or greater.
States and counties that get the flexible funding could pass money along to cities and counties with populations under 50,000 to help cover eligible expenses, such as support for schools and transportation.
Democratic House Speaker Nancy Pelosi, of California, said Democrats plan to draft a legislative package that would include more help for states and local governments, which could need close to $1 trillion in assistance over the next several years.
In the coming days, House Democrats are expected to release a plan that would give all cities and counties direct funding.
“Failure to act could lead to mass layoffs of teachers, public health officials, first responders, and other workers who keep us safe and provide services on which our constituents depend,” U.S. Rep. Nita Lowey, of New York, wrote in a letter to colleagues this week. She chairs the House Appropriations Committee.
On Wednesday, a group of legislators from New York announced a different bipartisan relief package for local governments. The measure introduced by U.S. Reps. Antonio Delgado, a Democrat, and Lee Zeldin, a Republican, and U.S. Senate Minority Leader Chuck Schumer and U.S. Sen. Kirsten Gillibrand, both Democrats, would provide a 50-50 split, half committed to cities, towns and villages and half to counties.
But Senate Majority Leader Mitch McConnell, a Kentucky Republican, has said that GOP senators are reluctant to agree to more spending on recovery legislation for state and local governments unless it is tied to additional liability protections for businesses and health care workers.
This week, McConnell said he didn’t think there was a “particular sentiment among Senate Republicans for a vast new rescue package” for state and local governments without first seeing how well the initial CARES funding was working.
Lucy Dadayan, a senior research associate at the Urban Institute, a Washington, D.C.-based think tank, said lawmakers should set aside politics when it comes to providing the financial aid local governments and states need.
“It’s important to understand that this is a nation in crisis and party affiliations and ideologies should be off the table,” she wrote in an email. “Everyone should work together and fight against the public health crisis and stay united.”