WASHINGTON — As Democrats scramble to send President Joe Biden their latest $1.9 trillion pandemic relief bill, federal lawmakers remain deeply divided over whether state and local governments need another infusion of federal aid.
Supporters of the bill – including: many Republican mayors — say the answer is yes. They say many states, especially those dependent on the service and tourism sectors, have seen revenues plummet and local governments are struggling more financially as they try to expand services with fewer workers.
“Many of our cities have furloughed workers, reduced their workforces due to labor attrition, canceled police and fire recruitment efforts, and froze capital budgets for building community infrastructure – all while taking additional expenses for the Covid response. 19, providing crucial services and reaching our communities that have been disproportionately impacted” – Nonpartisan Group of Ohio Mayors he wrote to federal lawmakers last month.
But Republicans in Congress, who also opposed including more state and local aid in the coronavirus stimulus bill approved in December, were largely unconvinced. They point to data showing some states are exceeding their revenue projections and argue that sending more financial aid to states would unfairly reward those that have locked down their economies rather than lifting restrictions on businesses.
“It has nothing to do with Covid-19. It has nothing to do with the economy,” Sen. Pat Toomey (R-Pa.) said during a press conference Wednesday. “It all has to do with throwing a whole big pile of money at fiscally irresponsible states.”
These arguments will play out in the Senate in the coming days as Democratic senators try to approve the massive stimulus package using a procedure that requires only 51 votes rather than the 60 that are typically required to approve bills in the Senate.
Bye. Democrats join majority to approve $1.9 trillion Covid-19 relief bill in close party line vote
A sweeping stimulus bill It would, among other things, provide $1,400 direct checks to Americans in certain income brackets, extend unemployment benefits and food programs, and continue a nationwide pause on evictions. It will also provide $130 billion to reopen schools; $7.5 billion for vaccination efforts; and billions more for child care through the child care provider subsidy program and the expanded child tax credit.
For states, local governments, territories and tribes, the bill provides $350 billion in direct aid, which includes $195 billion for states and the District of Columbia and $130 billion divided among cities and counties.
Of the money going to state governments, most of it – $169 billion – will be distributed based on a state’s share of the total number of unemployed people. Another $25.5 billion will be divided equally among states.
Money for local governments is distributed differently. The $65 billion for cities will be distributed based on the Community Development Block Grant formula, and the $65 billion for counties will be distributed based on population. (Funding estimates calculated by the House Oversight Committee for each state and local entity can be found here.)
Opponents of earmarking dollars for state and local governments have relied on recent analyzes that they say show states have been able to weather the economic storm. JP Morgan Analysis stated that state government revenues decreased by only 0.12% in 2020 compared to the previous year.
Data collected by the Urban-Brookings Tax Policy Center showed that total state tax revenues declined 1.8 percent from April to December 2020 compared to the same period in 2019.
But Lucy Dadayan, a senior researcher who co-authored the report, says the overall numbers mask wide variations among states: 28 states reported declines in overall state tax collections, with those that rely heavily on taxes on services and tourism or fossil fuel production seeing the hardest hits.
Her analysis shows that those that saw tax increases tended to be states with progressive income taxes, those that taxed groceries and those that implemented tax increases.
“Some people prefer to look at the situation as half full. Others prefer to see the glass half empty,” Dadayan said. “The reality is that countries are in different positions depending on the structure of tax revenues and dependence on different industries.”
There isn’t enough data to track the cumulative impact on cities, but Dadayan and others say local governments are likely in a more challenging fiscal situation than states because of their tax bases, which rely more heavily on revenue streams such as fees taxes for hotel stays and real estate.
She added that there is still a lot of uncertainty about what the fiscal outlook will look like once some semblance of normal life returns. For example, larger changes in employee workplaces could mean changes to commercial real estate leases and a resulting change in commercial property taxes, Dadayan added.
Employment figures for state and local governments also remain low, even as some states’ revenues have increased.
Alaska had the steepest decline in tax revenue in an Urban Institute analysis. One senator, Republican Lisa Murkowski, says she’s still not convinced the pending bill will allocate money fairly for a state like hers, which has a tiny population but has seen a steep drop in revenues.
“If Congress is going to throw this much money out the door, how can I make sure that states like Alaska that have suffered significantly and that still need a bailout, if that’s the term they exploit for the package, that we actually get access to dollars for rescue?” – Murkowski asked a reporter on Wednesday.
Any effort to improve the bill could begin to bear fruit on Thursday, when the Senate is scheduled to begin a lengthy debate on amendments to the legislation.
The start of that debate could be delayed for hours due to procedural tactics by Sen. Ron Johnson (R-Wisc.), who told a Wisconsin radio station on Wednesday that he plans to request that the entire bill be read aloud on the Senate floor before the House. the debate begins.
Democrats are trying to get the bill approved in the Senate this week so it can return to the House for another vote before March 14, when expanded unemployment benefits and a slew of other provisions from the latest aid bill begin to expire.