Put federalism to work with COVID-19 relief funds

Apr 28, 2020

On April 13, Washington Policy Center signed a national coalition letter to Congress requesting more flexibility for the original $150 billion CARES act funding provided to state and local governments. Washington’s (state and local) estimated share of the CARES act relief funding is just under $3 billion.

Here is the coalition letter:

“The CARES Act established a $150 billion Coronavirus Relief Fund to assist state and local governments combat the Coronavirus Disease 2019 pandemic. Under the Act, each state will receive at least $1.25 billion plus an additional amount based on population, with a portion of the money allocated to local governments within the state.

As written, however, the fund provides little actual relief for state budgets but instead all but compels them to devise new spending that can be attributed to the Coronavirus Disease 2019 (COVID-19).

Congress needs to address this unintended outcome quickly by providing states and local governments the flexibility to use money from the Coronavirus Relief Fund 1) to offset lost tax and fee revenue that would otherwise have paid for ordinary operating expenses between March 1 and December 30, or 2) to provide one-time tax relief to individuals and businesses to revive the local economy.

Unlike the federal government, most states and local governments must balance their budgets. New costs associated with the Coronavirus outside of Medicaid (covered by the Families First Act) and education (covered in the Education Stabilization Fund) would not come close to the full amount appropriated except through budgetary gluttony. Billions of dollars in tax and fee revenue, however, have been lost and cannot be recovered. We ask Congress to allow states the ability to use their Relief assistance in the most prudent and least disruptive way possible.”

The calls for more state/local flexibility are growing. As reported today by the PSBJ:

“The push for more state freedom in spending the first batch of money allocated by Congress last month comes as the clash intensifies over whether states should get hundreds of billions of dollars more in the next stage of emergency legislation — or whether there should be another recovery measure in the short term at all.”

While there is currently fierce debate in Congress about whether there should be additional state/local federal COVID-19 funding, it is important that national officials relax the restrictions placed on the original $150 billion in relief funds.

Let’s put federalism to work and allow local elected leaders to make the best decisions possible for their communities as they respond to the economic devastation caused by the global COVID-19 pandemic.