House committees began Wednesday to fill in the details of President Biden’s proposed American Rescue Plan with provisions that include the direct federal aid local governments have been earnestly pleading for.
Local governments would get 40% of the $350 billion in direct federal aid to state and local governments under legislative language
Other committees also are voting on legislative language for their pieces of the $1.9 billion package that could pass the House and Senate with only partisan Democratic support or limited votes from Republicans.
The legislation would extend through the end of September many of the short-term emergency measures approved by Congress in December in addition to the direct state and local aid that was blocked when the Senate was controlled by Republicans.
Local government groups have been stressing the urgency of receiving the funding.
“Local governments are still laying off city workers to free up funding for urgent expenditures related to COVID-19, and to balance budgets amidst declining revenues,” said Michael Wallace, legislative director for housing & community and economic development at the National League of Cities.
At the state level, revenues from the onset of stay-at-home orders in March through the end of December declined an average of 1.8% compared to a year earlier, according to new data released by the State and Local Finance Initiative of the Urban Institute.
The year-over-year revenue loss was more than 9% in Florida, Texas, Oregon, Alaska, and Hawaii. New York, Pennsylvania, West Virginia, Oklahoma, and Montana had losses of more than 3%.
Lucy Dadyan, the institute’s senior research associate, noted that all states also faced higher expenses related to the pandemic even if they suffered smaller revenue losses or, in some cases, had revenue gains.
The House Oversight Committee plan for apportioning direct aid would give states and the District of Columbia $195.3 billion. Each state is guaranteed a minimum allocation of $500 million with the remaining $169 billion based on the state share of total unemployed workers.
The $130.2 billion for local governments would be divided evenly between cities and counties.
The share for counties would be based on population while the share for cities would be divided two ways. The Community Development Block Grant formula would be used to distribute $45.57 billion for municipalities with populations of at least 50,000. The remaining $19.53 billion would go to municipalities with populations of less than 50,000
Meanwhile, the House Transportation and Infrastructure Committee is voting on $30 billion for essential transit and rural intercity bus service, $8 billion for airports, and $50 billion for the Federal Emergency Management Agency’s Disaster Relief Fund.
The House Ways and Means Committee is including children living in Puerto Rico in a nationwide increase of the Child Tax Credit to $3,600 for children under 6 and $3,000 for dependent children from 6 through 17.
In Puerto Rico that expanded tax credit would reach an estimated 355,000 families with an average benefit of $770, said Javier Balmaceda, a senior policy analyst for the liberal-leaning Center on Budget and Policy Priorities which focuses on low-income Americans.
“There are estimates out there that this could inject roughly $275 million into the economy,” said Balmaceda, noting around 58% of children in Puerto Rico are living in poverty. “It’s going to be a critical tool to continue lifting people out of poverty in Puerto Rico. These are corrections to systematic disparities.”
Another key tax provision would expand the federal Earned Income Tax Credit nationwide, except for Puerto Rico which would instead get funding to expand its local version of the credit.
Nationally the expansion of the EITC for workers without children would be the largest since 2009.
“The Institute on Taxation and Economic Policy
Elsewhere, state budgets would receive a separate boost from a 5% increase in their Federal Medical Assistance Percentage, or FMAP, or two years if that state has newly expanded Medicaid.
The House Energy and Commerce Committee was planning to approve that FMAP incentive on top of last year’s CARES Act provision that gave states a 6.2% increase for however long the ongoing health emergency continues.
Federal Medicaid assistance through FMAP is annually the biggest piece of federal aid to most states.
Neal said Thursday that the legislation will “kickstart a coordinated response” to the emergency caused by the COVID-19 pandemic.
“Anyone who thinks we will recover without intervention isn’t paying attention,” Neal said.
A failure by Congress to act “could put 4 million jobs in jeopardy this year,” said Neal, citing an estimate by Moody’s Analytics.
Reflecting the skepticism of most Republicans at the size and scope of the legislation, the top Republican on the House Ways and Means Committee pointed out that Democrats are departing from their bipartisan work last year when Congress approved five emergency bills.
"This nearly $2 trillion 'stimulus' package is neither targeted nor a stimulus,” said Rep. Kevin Brady, R-Texas.
"Whatever this rushed, partisan, special interest 'stimulus' package does, it comes with no bipartisan discussion, no opportunity for finding common ground, and no credible estimate of jobs.”
