Two U.S. senators are pursuing a bipartisan proposal to provide $500 billion in grants to state and local governments in a new tranche of coronavirus aid that would follow the emerging deal for an additional $450 billion for small businesses, hospitals, testing and other priorities.
The $500 billion State and Municipal Aid for Recovery and Transition (SMART) Fund would be divided equally into thirds of $166.6 billion each based on population, COVID-19 cases and revenue losses at the state level.
Establishing those parameters would particularly help hard-hit states such New Jersey and Louisiana that have been coronavirus hot spots.
The proposal by Sens. Bill Cassidy, R-La.,and Bob Menendez, D-N.J., would supplement the $150 billion Coronavirus Relief Fund for state and local governments in the Coronavirus Aid, Relief, and Economic Security, or CARES Act, that is restricted to covering COVID-19 related expenses.
Eligibility for direct aid would be expanded to counties and towns with populations as small as 50,000 compared to the current threshold of 500,000.
That’s been a key request of groups such as the National League of Cities and U.S.Conference of Mayors.
Flexibility also would be increased to use the funds to plug revenue losses due to the COVID-19 outbreak, and the proposal targets additional funding toward coronavirus hot zones to combat the pandemic head-on.
That’s been a priority for all state and local government groups.
Menendez told reporters in a conference call Monday that he and Cassidy reached their agreement late in the weekend so it “wasn’t on the table” for the deal replenishing the small business assistance and hospital funding.
“This is poised for what I believe will be COVID four,” Menendez said, noting that Senate Democratic Minority Leader Chuck Schumer of New York is supportive of their effort.
The $500 billion is the same amount that has been requested by the National Governors Association.
Gov. Larry Hogan, R-Md., who chairs the NGA, said Sunday on CNN’s State of the Union that the funding “is desperately needed, for the states, if we want to get this economic recovery moving.”
However, Hogan said the Trump administration has committed to work with governors on the next stimulus bill.
“We do not want to hold up funding to these small businesses,” Hogan said.
President Trump said Sunday his administration is “saving that for another time.”
“Some states and local governments need it,” Trump said. “I’m the first one to admit that. We're going to be saving that for another little bit of a later date. It will probably be our next negotiation.”
Cassidy said he will personally advocate for aid to state and local governments in future congressional packages.
“If you think about it, the only thing worse than the virus hanging around is that the economy does not recover,” said Cassidy, who joined Menendez on the call with reporters. “This is critical to financial health being restored for municipalities to provide the essential services so that employers and employees can restore their financial health.”
The National Conference of State Legislatures estimates states could cumulatively experience a $300 billion to $400 billion shortfall in revenue in fiscal 2021.
“We urge you to appropriate at least $300 billion in direct, flexible relief funding to states,” NCSL Executive Director Tim Storey said in a Thursday letter to congressional leaders. “This will enable legislatures and governors to mitigate drastic declines in revenues necessary to maintain essential services to all Americans. Furthermore, states need the assistance to invest aggressively in state economies to expedite a full economic recovery.”
NCSL’s Storey said, “Every source of revenue for states is showing sharp declines. Coupled with the delayed receipt of income and property taxes due to the extended filing deadline, NCSL projects revenue losses could be between 15-20% in almost every single state.”
Officials of the National Association of Counties estimate that some urban counties are being penalized by a total of $5.1 billion out of the current $150 billion Coronavirus Relief Fund because they are the home to large cities of over 500,000 population that are getting direct grants. They blame the aid formula being used by the Trump administration.
Los Angeles County was entitled to $1.7 billion but will lose $696 million that goes back to the state capital in Sacramento, NACo Executive Director and CEO Matthew Chase said last week.
Menendez, asked by The Bond Buyer if his legislation will rectify that problem, said, “I am not fully aware of the particular nuance that you just described.”
