If Republicans take the House in November, as many expect, cities should expect heightened scrutiny – even possible clawback – of pandemic funds.
That’s the warning Government Finance Officers Association lobbyist Emily Brock delivered Saturday as part of a Washington update to the debt committee at the GFOA's 116th conference, held this year in Austin, Texas.
Meanwhile, with the clock ticking toward midterm elections in November, negotiations are heating back up over the long-stalled Build Back Better reconciliation bill, which Brock said muni lobbyists are watching closely for an opportunity to promote a public finance agenda.
Passed in March 2021, the American Rescue Plan Act allowed more spending flexibility than in previous stimulus packages, but does include various restrictions.
“There’s always the threat that Congress can try to claw back [American Rescue Plan Act] funds,” Brock said. “If there’s a change in the House for example, the potential for clawback gets larger and larger, and the request for clarity of information [on how the funds have been spent] becomes stronger and stronger,” she said. “So that’s something for all GFOA members to be thinking about: how can we support ourselves with clarity of information in case there are questions?”
Republicans have publicly questioned how cities and states are spending the $350 billion of ARPA state and local funds, and blamed that huge infusion of federal cash into local coffers for rising inflation, one of the GOP's chief talking points for the November elections.
With the second round of ARPA funds set to be distributed soon, questions still linger about how they can be spent – many cities want to use them for affordable housing, for example – and the GFOA has asked Treasury to provide more clarity, Brock said.
Meanwhile, on Capitol Hill, Senate Majority Leader Chuck Schumer is reportedly talking with key Sen. Joe Manchin, D- W.Va. about a roughly $1 trillion energy and climate reconciliation bill that the Democrats hope to advance before the election. The legislation could offer a place for public finance priorities like the restoration of tax-exempt advance refunding or the expansion of bank-qualified debt, Brock said.
Build Back Better “is on life support but it’s definitely still a thing,” Brock told the debt committee, adding it could be trimmed to under $600 billion.
The reconciliation process that the Democrats hope to use to pass the bill expires after September, Brock noted.
“After September everybody goes and starts campaigning so everyone loses focus,” Brock said.
Time is further limited because Congress recesses in August.
The current bill reportedly relies on corporate tax generators like a global minimum tax to raise around $800 million. Manchin wants at least half of any new tax revenue or savings to go toward reducing the deficit, according to Washington reports, which would decrease the amount available for spending.
Brock added that the House Municipal Finance Caucus, a bipartisan group of lawmakers who have said they will work to advance public finance priorities, is still “working toward advancing our goals” and that some bills are ready to go, like
It’s unclear where Arizona Democrat Sen. Kyrsten Sinema, who along with Manchin resisted earlier versions of the bill, would land on a slimmed-down reconciliation bill. With an evenly divided Senate, every Democrat would need to be on board with a reconciliation bill, with Vice President Kamala Harris breaking the tie.
