Legislators and Governors Battle Over Who Spends the Rescue Act Money

Most news reports about the $350 billion of American Rescue Plan Act money that is going to states and localities focuses on the question of ‘how’ to spend the money. But while that’s a vital question, there’s another pivotal area of debate: ‘Who’ is going to spend the money? In a growing number of states, the legislatures and the governors have been at odds over who has the authority to make those critical decisions. 

Similar battle lines have been drawn in nonfiscal ground, as legislatures in states like Wisconsin and Utah, rescinded gubernatorial decisions to require masks during the pandemic. But debates over gubernatorial powers have also extended to questions about the American Rescue Plan Act dollars.

“This tension is not a new one,” says Natalie Wood, the director of the National Conference of State Legislature’s Center for Legislative Strengthening, “In any given year, you might see the legislature attempting to assert itself and its powers over the governor.” Right now, she says, a significant issue is about “legislatures’ ability to have a say in how federal funds are spent.”

You might think that this would be the kind of question for which there would be a simple, standard answer. But the rules over the disposition of funds vary widely from state to state. In 40 states, for example, the governor has the authority to spend unanticipated federal or other nongeneral funds, according to the National Association of State Budget Officers, but in 27 of those, there are a wide variety of restrictions on spending without legislative approval.  

Not only do statutes vary widely from state to state, but “there are states in which there are differences in interpretation about the role of each branch,” says Kathryn White, director of budget process studies at NASBO.

Guidance from Washington, D.C has been absent in this area. “Congress didn’t do itself any favors by not being clear over who had the authority to spend the money in the states,” says one high ranking state legislative finance committee member. “They wanted the states to act expediently, but not making that clear is slowing the process down.”

Questions of authority grow even more complex when the legislature isn’t in session and the governor is left alone to make all the calls. According to the NCSL, there are 14 states in which only the governor can call the legislature into special session. But in a growing number of those, the legislature is trying to get that authority.  

It did so successfully in Indiana, where the general assembly called itself back into session, an action met by a gubernatorial veto and then a vote to override by the legislature. “Now that the veto is overridden it may go to court,” says Larry DeBoer, a professor emeritus at Purdue University. 

Meanwhile, the wrangles between executive and legislative branches over spending authority continue to roll. In Kentucky, for example, there has been a long-standing statute that says that “if there are unexpected federal dollars, then the legislature delegates authority to the executive branch, with oversight,” explains John Hicks, state budget director there.  

But when it came time for the state’s 2021 budget, the Republican-dominated legislature came up with a budget bill that stated, the ARPA money “shall not be expended or appropriated without the express authority of the General Assembly.” This appears to be part of a general theme on the part of the Kentucky legislature to wrest control from the governor, including a successful effort to remove most of his covid-related restrictions.  

Democratic Gov. Andy Beshear used his line-item veto to expunge one part of the bill that would have prevented him from making decisions about how to spend any of the ARPA money allocated to the state. When the legislature came back into session, that veto was upheld, and he was able to spend about half of the dollars from the State Recovery Act Fund, which focused on items that were singled out in the plan including infrastructure, wastewater and broadband, and repayment of unemployment funds. The legislature, however, retained the capacity to restrain the governor from spending the remaining portion of that money. 

Not All Are Partisan Debates

Though Kentucky’s situation may have been heavily weighted with politics, many of these debates have not been partisan in nature. Even states in which both the legislative and executive branches are of the same party, questions over who has the power over the purse strings continue to pop up.

In New Mexico, for example, state law says that all undesignated revenues should go into the general fund. Democratic Gov. Michelle Lujan Grisham has been adamant that these funds were hers to spend, and that she didn’t need legislative approval to do so. But the legislature, also under the control of the Democratic party, didn’t agree and spent $1.1 billion of the state’s $1.7 billion the state rescue funds. 

The governor, in turn, vetoed that spending. She then allocated $650 million for unemployment insurance. As things stand, the governor has only spent an additional $20 million on back-to-work bonuses and vaccine prizes, while the rest sits in the treasury. 

Meanwhile, though this hasn’t been a political debate, New Mexico Republicans are making hay out of this kind of dysfunctionality. Some are claiming that the governor is being secretive and out of touch with the public, claiming that she’s carving up the $1.7 billion out of the public view.

Meanwhile, in Oklahoma, the legislature was frustrated when the March 2020 CARES funds were spent by the executive branch with little deference to the legislature’s desires. According to Oklahoma state Sen. Roger Thompson, “The governor put together a group of legislators who were supposed to be advisory. But they were just informed after the decisions were made.”

As a result, when the APRA money became available, legislation was passed mandating that all expenses be approved by the state’s lawmakers. Thompson believes, however, that the process is going to be somewhat more collaborative under the new arrangement. The state’s chief financial officer and the chief operating officer, both of whom are in the executive branch, are in productive conversations with legislators about how this new $1.9 billion in federal aid will be spent, according to Thompson.

Over the course of years, we’ve seen a bundle of battles between executive and legislative branches, particularly in states where there’s a split between party affiliations in the two. We saw the beginning of a new round of debates over the CARES Act money, but since that had to be spent in a relatively short span of time, resolutions needed to be found quickly. With a few years to spend the ARPA money, debates over who controls its use seem likely to continue for some time.