Update From Washington, D.C.
Lawmakers Introduce State & Local Fiscal Aid Package; Bicameral Negotiations on Broader COVID-19 Relief Bill at a Standstill
May 21, 2020
This week, House and Senate lawmakers introduced bipartisan legislation that would provide federal funding to help states and local governments respond to the COVID-19 pandemic. In the upper chamber, the bill (S 3752) is being spearheaded by Senators Bob Menendez (D-NJ) and Bill Cassidy (R-LA); the House companion measure (HR 6954) is sponsored by Representative Mikie Sherrill (D-NJ).
The legislation, known as the State and Municipal Assistance for Recovery and Transition (SMART) Act, is the latest in a series of bills designed to provide federal financial support to states and localities in the frontline battle against the coronavirus.
Under the SMART Act, $500 billion in emergency funding would be provided to state, local, and tribal governments. Funds could be used to cover COVID-19 expenditures made between March 1, 2020 and December 31, 2020 and could also serve as the local match for FEMA Public Assistance grants. Additionally, the dollars could be used to backfill lost revenues, with certain limited stipulations.
Pursuant to HR 6954/S 3752, federal assistance would flow through the states, with each state receiving three tranches of funding based on the following equally weighted factors: relative population; relative infection rates; and, relative revenue losses.
In turn, states would be required to sub-allocate funds to local governments, as follows:
- Population Tranche – Counties and cities would each receive one-sixth of the state’s funding allocated proportionally based on population.
- Infection Rate Tranche – Counties and cities would each receive one-sixth of the state’s funding allocated proportionally based on population.
- Revenue Loss Tranche – Counties and cities would each receive one-sixth of the state’s funding allocated proportionally based on each county or municipality’s share of the combined revenue loss of all counties and municipalities in the state.
Of the $500 billion available under the SMART Act, counties nationwide would receive a total of $80 billion. According to the Tax Foundation, the $500 billion figure aligns closely with total projected state and local COVID-19-related revenue losses for fiscal years 2020 and 2021.
It should be noted that several provisions of the SMART Act stand in contrast to the state and local aid provisions of the sweeping coronavirus relief package that was approved by the House last week. For example, the latter bill, known as the HEROES Act (HR 6800), would provide federal financial support directly to local governments, with the nationwide county allocation totaling $187.5 billion.
Looking ahead, it remains unclear if and when Senate Republicans will be open to discussing a broader coronavirus relief bill. A number of key GOP senators have been critical of the HEROES Act, characterizing the legislation as a wish list of Democratic priorities and signaling their preference to pause further legislative action in order to assess the impact of previous federal COVID-19 spending.
Despite their reluctance to move ahead with a larger package, Senate Republicans do appear willing to support a bipartisan House plan that would address deficiencies in the current Paycheck Protection Program (PPP). As was the case with the most recently approved COVID-19 bill (PL 116-139), the desire of Republicans to address the concerns of small businesses will likely open the door to a broader deal with Democrats, though the scope of such a measure remains uncertain.
HHS Announces COVID-19 Testing Funds
On May 18, the U.S. Department of Health and Human Services (HHS) announced the availability of $11 billion in funding to states, territories and tribes to support COVID-19 testing. According to HHS, California is receiving $499 million.
It should be noted that Los Angeles County is among five urban areas receiving a separate allocation based on the existing formula used by the Centers for Disease Control and Prevention to allocate epidemiology and lab capacity funds. Jurisdictions will use the funding they receive to meet the testing goals laid out in their COVID-19 testing plans, including purchasing supplies (such as test kits and other testing supplies, as necessary