Connecting state and local government leaders
Lawmakers tell Route Fifty that “clawing back” unspent or misspent American Rescue Plan Act funds from states and localities is a possibility.
For over a year, House Republicans have complained to the Biden Administration about how states and localities are spending Covid-19 relief funding for things like pickleball courts and tourist attractions. But the lawmakers say that the administration has largely rebuffed their inquiries into whether the money is being used appropriately.
Now, with a chance to take control of the House in November’s elections, leading Republicans are vowing to use the authority they’d regain to ramp up scrutiny of the billions of dollars Washington is sending to the state and local level under the American Rescue Plan Act.
“There's going to be some aggressive oversight, both of this administration and for states and local municipalities,” Rep. Jason Smith, the top Republican on the House Budget Committee, said in an interview.
Smith said that he wants more information about what the White House has been telling states and localities about how they can spend ARPA funding. But, he added, “If the state and local municipalities aren't spending it according to the law, they're gonna have to send the money back.”
The rumbling on the issue from Republicans underscores how one of the largest infusions of federal cash to state and local governments in a generation has become divisive on Capitol Hill, adding to pressure on state and local officials to show that the money is getting spent wisely.
At the very least, leading Republicans on the Budget Committee told Route Fifty they will be dragging White House officials like Gene Sperling, a special assistant to President Biden leading ARPA’s implementation, before them to answer questions they say the administration has dodged.
The lawmakers are even threatening to hold administration officials in contempt of Congress, and to withhold funds from the Treasury Department, if the officials do not appear to testify at hearings.
“We've seen a staggering amount of waste and abuse of taxpayer dollars under the American Rescue Plan” Smith said.
“We need answers. The American people want answers. They deserve answers. And we've been asking for a long time,” he added.
Rep. Buddy Carter of Georgia, who could take the helm of the Budget Committee next year is also, like Smith, raising the idea of taking back some of the billions in ARPA funding state and local governments haven’t yet spent—or in the view of Republicans, have misspent—to lower the cost of an aid package that they argue was excessive and worsened inflation.
In a game of musical chairs that will occur in Congress in the next few months, Smith is seeking to succeed retiring Rep. Kevin Brady of Texas as head of the tax-writing Ways and Means Committee. Carter, meanwhile, is campaigning for the top GOP spot on the budget panel.
“Some of this money that hasn't been spent, there's no reason why it should still be out there,” Carter said. “We need to bring it back in and put it toward the debt.”
States could also face added scrutiny from Ways and Means.
“There’s going to be oversight,” Rep. Adrian Smith, of Nebraska, who is also vying to chair that committee, said in an interview.
Ways and Means has jurisdiction over unemployment insurance. And a spokeswoman for the Nebraska Republican said he continues to support a proposal to “claw back fraudulent COVID relief payments.”
The spokeswoman was referring to a bill sponsored by Brady, and also backed by Jason Smith, that would reverse a Labor Department decision to no longer require states to go after improper unemployment payments.
That bill would require states to send back 75% of the money they recover to the federal government. But it would enable them to keep the rest to spend on measures to prevent fraudulent payouts in the future.
To be sure, how much Republicans will be able to do depends on whether they are able to win majorities in both the House and Senate. They would also face the roadblock of Biden’s veto power.
In the meantime, ARPA spending is providing fodder for Republicans to go after House Democrats running for re-election.
The National Republican Congressional Committee, for instance, released a television ad Sept. 27 attacking Democratic Rep. Abigail Spanberger of Virginia. “She votes with Nancy Pelosi 100% of the time, voting for trillions of dollars in wasteful spending,” the ad said. “Pet projects like golf courses in Colorado, a ski resort in Iowa, even a luxury hotel in Florida.”
The ad referred to Colorado Springs, Colorado’s use of upwards of $6 million in ARPA funding to replace the irrigation systems at two golf courses, a project the city says will conserve water. Investments in water and sewer infrastructure are an eligible use under the law’s spending rules.
Pottawattamie County, Iowa used $2 million of its ARPA funds to purchase a ski hill, according to the Associated Press.
AP also reported that Broward County, Florida paid for building a 29-story, 800-room hotel with $140 million in ARPA funds that were allotted to replace lost revenue during the pandemic. A county spokesman, though, denied the report to Route Fifty saying in a statement the hotel will be funded with county funds and by issuing debt.
ARPA gave states and localities wide flexibility to decide how to use the aid they received. Proponents of offering support to tourism-related businesses note that the sector was one of the hardest hit during the pandemic, as travel ground to a near halt. Likewise, parks and other outdoor recreation facilities saw increased use as people avoided indoor spaces.
States and local governments who have had ARPA spending criticized, say projects like adding more parking and restrooms at Myrtle Beach, South Carolina will help to revive tourism. Municipalities have defended paying for projects like pickleball courts with ARPA dollars because of provisions allowing them to replace lost revenue.
A joint effort by Brookings Metro, the National Association of Counties and the National League of Cities to track how 150 larger local governments are spending ARPA dollars found earlier this year that the greatest sums—$4.3 billion for cities and $1.5 billion for counties—were going to government operations. Much of that money backfilled revenue losses attributed to Covid.
A report by the left-leaning Center on Budget and Policy Priorities said states have used significant chunks of ARPA funds on human services and economic development.
Jason Smith, though, believes the administration should do more to limit spending to areas related to combatting the pandemic.
“We know that the statute laid out for different uses of the funds. And, I'll tell you right now, $140 million for a luxury hotel in Florida is not a proper use. Nor is $2 million worth of trees in New York. Or pickleball courts in Michigan. Or $5 million for a moonshine trial in North Carolina.”
Carter agreed. “One of our primary objectives in the next session when we’re in the majority is going to be oversight," he said in an interview. He added that oversight of pandemic aid “is going to be at the top of our list.”
Republicans say letters they’ve sent to the administration inquiring about ARPA spending have gone unanswered. For instance, Jason Smith, in May last year, asked Sperling what happened to ARPA funds allocated to county governments that do not exist. He said he didn’t get an answer.
The question referred to a report by the Tax Foundation that noted Hartford County, Connecticut was in line to receive $173 million in ARPA funding. However, there are no county governments in the state. The Treasury Department did not respond to an inquiry from Route Fifty. But David Sinko Steuber, chief of staff to Hartford’s mayor, said ARPA funds allocated to the state's “counties” were instead distributed to municipalities.
Smith also asked Sperling questions about his role, like: “Who do you directly report to in the White House?” Additionally, he pressed Sperling on whether he would commit to testifying before Congress and how often he would provide detailed reports about ARPA spending.
Other letters Republicans have sent to the administration have raised issues about topics like what is being done to prevent fraudsters from stealing unemployment insurance and small business aid.
Spokespeople for the White House and the Treasury Department did not respond when asked if they had replied to Republicans’ queries, or to questions about how they are evaluating state and local ARPA spending.
Carter, in the interview, vowed to use “the power of the purse” to push the Treasury Department to respond to Republican concerns about ARPA.
“They're going to answer if I'm budget chair,” Carter said. And if they do not, “we're gonna hold their money until they do.”
Jason Smith said lawmakers would hold Biden administration officials in contempt of Congress if they didn’t agree to show up for hearings.
“We've asked for Gene Sperling. We've asked for [Treasury Secretary Janet Yellen] to come before our committees,” he said. “They refuse to, but you betcha, when we're in the majority, they will be before the House Ways and Means Committee. I can tell you that for sure.”
Kery Murakami is a senior reporter for Route Fifty.