Counties could get a separate piece of $1 trillion in federal aid

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Speaker Nancy Pelosi, D-Calif., said for the first time at her weekly news conference Thursday that the federal aid for state and local governments in the upcoming CARES Act 2 might approach $1 trillion.

Congressional Democrats are negotiating with Republicans for up to $1 trillion in state, county and local government aid in a CARES Act 2 bill that would include some infrastructure spending such as broadband.

County governments would receive their own separate allocations of federal aid.

“So we may have three tranches, state, county, because many counties deliver health services and the rest and then the municipalities,” Speaker Nancy Pelosi, D-Calif., said at her weekly news conference Thursday.

Pelosi also for the first time said that the aid for state and local governments might approach $1 trillion.

“We think that is a significant improvement,” Emily Brock, director of the federal liaison center for the Government Finance Officers Association said Friday. “She’s definitely been responsive to the estimates she’s receiving for state and local governments.”

The CARES Act signed into law last month distributed federal aid directly to states or to localities with populations of more than 500,000.

Brock said there are other federal formulas for aid that can directly reach smaller municipalities and county governments. “Cities provide assistance for homelessness and schools, for example, while counties bear the brunt of health expenses,” Brock said.

The National Governors Association has requested $500 billion to cover state government shortfalls. And the National League of Cities, U.S. Conference of Mayors and National Association of Counties have separately requested $250 billion for local governments.

But shortfall estimates are growing and are being updated. On Wednesday the liberal-leaning Center on Budget and Policy Priorities said that forecasts of worsening medium-term economic conditions led to a new projection that state budget shortfalls could rise to $650 billion through 2022.

Moody’s Investors Service said Friday it was changing its outlook for state governments to negative from stable because the economic downturn from the coronavirus pandemic is expected to be severe and the subsequent recovery will challenge state credit strength.

“Emergency federal actions so far do not provide funding to help states fill gaps in revenue collections, but additional financial assistance for that purpose would help support state credit quality,” Moody’s said. “States themselves have strong powers to make budgetary adjustments through expense cuts, revenue increases, and shifting costs to lower levels of government, but the historic crisis will substantially test the options.”

A bipartisan group of 101 House lawmakers released a letter Friday calling on Congress to separately invest in direct funding for smaller and rural county governments in upcoming COVID-19 relief packages.

The letter was led by Democratic Reps. Peter DeFazio of Oregon and Abigail Spanberger of Virginia along with Republican Reps. Rodney Davis of Illinois and John Katko of New York.

“We are particularly concerned that smaller and more rural counties—which need to continue operating their hospitals, emergency response centers, and more—receive adequate resources to successfully address the needs of their residents,” the letter said. “As such, we urge you to disburse funding directly to localities to ensure that these allocations more closely reflect the special role and critical responsibilities of county governments of all sizes during this public health crisis.”

A representative from the National Association of Counties said the separate aid for counties is not yet a forgone conclusion given that 101 lawmakers who signed the letter were five-to-one Democratic versus Republican.

Public comments by members of Congress also are continuing to highlight a partisan divide.

Senate Democratic Minority Leader Chuck Schumer said Thursday night during an appearance on the CBS TV show the Late Show with Stephen Colbert, that state and local governments are “going broke.”

“They're going to have to lay off firefighters who protect us, police officers, bus drivers, food safety workers, hospital workers,” Schumer said. “So we ought to get real money – the states and localities are spending a ton of money on COVID but they're also not getting revenues because no one's paying taxes. You know—the federal government delayed the taxes till June 30, so that means most states don't get the taxes either because the two are done in sync.”

On the other side, House Republican Minority Leader Kevin McCarthy of California indicated a receptiveness to direct local government during his weekly news conference Thursday.

“If you go and apply this directly just to a state, to a governor itself, and you give them a lot of flexibility, they will use it to pay off other things and not help the cities and counties where people really need it,” McCarthy said. “So why don't we open it up to more of a city and county where the governor is not taking his 25% off the top? Why don't you say that it can't pay for any pensions or anything else, that it only has to be for COVID-19, have people sign up and show the accountability of what they'd lost during the time period.”

Separately, McCarthy joined Thursday with Senate Republican Majority Leader Mitch McConnell of Kentucky in releasing a joint statement that the next congressional aid package must provide “strong protections from frivolous lawsuits.”

“We cannot let a second pandemic of opportunistic litigation enrich trial lawyers at the expense of Main Street and medical professionals,” the McConnell-McCarthy statement said. “Senate and House Republicans agree these protections will be absolutely essential to future discussions surrounding recovery legislation."

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