How Congress’ Competing Coronavirus Bills Would Help State, Local Governments

UPDATE: Senators say they have a deal on a proposed economic stimulus package. There is more information in a story about the deal and separate piece on reactions from governors. 

While state and local government officials have argued they need billions from Congress to help stay afloat while spending to fight the spread of the coronavirus, the Senate’s $1.8 trillion economic stimulus package would pit them against businesses instead of providing dedicated funding. 

The latest version of the bill would provide $500 billion in economic stabilization loans for state and local governments and businesses. The bill crafted by Senate Republicans includes few stipulations to limit how the money could be spent and Treasury Secretary Steven Mnuchin would have wide latitude to make determinations about who would receive funding.

But the lack of direct funds earmarked for state and local governments has raised concern that those heading up frontline response efforts against the coronavirus outbreak will have to compete against businesses for access to much-needed money.

“The risk is there would be the most focus on the business side and not so much on state and local,” said Garrett Watson, a senior policy analyst with the conservative-leaning Tax Foundation. “There is the concern there that many businesses would get preferential treatment over state and city governments.”

Democrats have made the issue of state and local government assistance one of their key platforms during the negotiations. Senate Minority Leader Chuck Schumer said Monday that lawmakers were “fighting hard and making progress” to address the issue.  

“They are propping up local healthcare networks virtually on their own, their revenues are dramatically declining,” Schumer said of the financial difficulties faced by local governments. “Many towns and villages across America, the smaller ones in particular, might be going broke pretty soon if we do nothing. If we can help the big corporations, we can help our local towns and villages and the taxpayers they represent.”

The Senate’s attempts to advance the Republican-backed stimulus package failed Monday afternoon in a party-line vote. Senate Majority Leader Mitch McConnell derided Democrats after the vote, and said efforts to pass a bill could stretch until the end of the week if they don’t come to an agreement. 

“The American people have had enough of this nonsense,” McConnell said. 

Meanwhile, House Democrats have sought to stake out an alternative that would provide direct funding for local and state governments. A summary of Democrats’ $2.5 trillion proposal, which was circulated Monday, indicated the legislation would provide $200 billion in stabilization funding for states and another $15 billion in Community Block Grant Funds for local governments. Unlike the Senate plan, the money in the House bill would be grants, not loans.

It also directs the Election Assistance Commission to dole out billions of dollars in grant funding for states to carry out this year's election—which undoubtedly will become more complicated to manage during the outbreak of a deadly, contagious disease. The proposal would require states to allow 15 days of early voting and “no-excuse” absentee vote-by-mail in an emergency.

As Congress worked on the legislation over the weekend, local leaders reached out to federal lawmakers to request local government-related spending that could be used to cover the growing costs and economic losses associated with containing the virus outbreak.

The National League of Cities estimates that cities will need at least $250 billion in emergency funding to stay afloat and counteract the negative economic effects the outbreak has wrought on local economies.

Counties in particular are worried that because they are not directly named as funding recipients in the Senate bill. In theory, this could mean they would  have to apply to states for funding and get bogged down in a slow bureaucratic process, said Blaire Bryant, an associate legislative director with the National Association of Counties.

“Our concern is that counties have direct access to this fund without prior approval,” Bryant said, adding the association would be supportive of language that grants counties direct access to the funds.

More guidance on how the money in a larger fund also available to businesses would be distributed to state and local governments, such as through need-based formulas or by dedicating a certain percentage to local governments, would also be helpful and provide assurance that local governments get their fair share, she said.

Counties are racking up expenses supporting local healthcare systems amid the outbreak. Los Angeles County has estimated that it would need $290 million over six months to offset its costs so far, while King County, Washington estimates it would need $50 million, Bryant said.

The National Governors Association has argued the Trump administration should provide states with at least $150 billion in direct and immediate aid.

“Providing aid directly to states and territories gives governors the flexibility they need to try innovative approaches to protect a wide range of services such as: addressing the increase in unemployment, minimizing the economic impact of business closures, ensuring all students have access to education, meeting the child care and housing needs of residents, and maintaining public transportation and social welfare programs,” NGA leaders wrote last week in a letter sent to congressional leaders.

OTHER STORIES from Route Fifty:

• Coronavirus Risks Spur New Jersey to Release County Jail Inmates

• Cities Rush to Respond as Homelessness and Coronavirus Collide

• Many Areas of the U.S. Face Hospital Bed Shortages

• States Postpone Elections, Explore Options for Mail-In Voting

• Crowdsourcing to Fight a Pandemic

• Public Officials Chastise Residents Who Aren’t Taking Social Distancing Seriously

• Move by Fed May Help Shore Up Short-Term Borrowing for States and Localities