Smaller Texas jurisdictions left out of most coronavirus relief funding

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Hundreds of Texas cities and counties are getting a fraction of what they expected under the Coronavirus Aid, Relief and Economic Security Act.

Problems began at the outset of distribution when the CARES Act allowed cities and counties with populations of 500,000 or more were to go directly to the U.S. Treasury Department for grants, bypassing state government, according to Noe Hinojosa Jr., president and co-founder of the financial advisory firm Estrada Hinojosa & Co. in Dallas.

United Airlines workers pack food for the Houston Food Bank in May. The state's larger and smaller local governments are tussling over federal coronavirus relief.

The 12 counties and six cities in Texas that qualified for the direct Treasury funding received $3.2 billion, Hinojosa said, because the Treasury, in his opinion, erroneously gave the big cities and counties 100% of their per capita allotment. That $3.2 billion represented 28% of the $11.2 billion for state and local governments in Texas.

“Smaller counties lost $1.4 billion when the U.S. Treasury made the mistake of over-distributing to large counties,” Hinojosa said.

Under the CARES formula, 55% of Texas’ $11.2 billion was apportioned to the state and 45% to local governments, regardless of size. Thus, the big cities and counties should have received $1.4 billion, which is less than half of what they actually received, according to Hinojosa.

Subtracting that $3.2 billion from the $11.24 billion allotted to Texas left $8 billion, Hinojosa said.

The state’s 55% of the $11.24 billion came to about $6.1 billion, Hinojosa said. That left only $1.85 billion for the 242 counties and the cities therein. That $1.85 billion represented only 17.3% of the $11.24 billion for Texas, not the 45% promised.

The CARES Act was intended to distribute $170.50 per capita. But with the reduced funds remaining, Texas dropped that to $55 per capita. Then, the Texas Division of Emergency Management notified the local governments below 500,000 population that they would receive only 20% of the $55 per capita allotment.

As explained by Gov. Greg Abbott in a May 11 letter to local governments:

“Consistent with the CARES Act, 45 percent of the total $11.24 billion state allocation — approximately $5.06 billion — will be made available to local governments. Of that $5.06 billion, Treasury has directly sent just over $3.2 billion to the six cities and 12 counties in Texas with a population greater than 500,000. That leaves approximately $1.85 billion that the state can make available to the cities and counties in the rest of the state.”

“The first allocation from the $1.85 billion in local funds will be made available to these cities and counties on a $55 per capita allotment,” Abbott wrote. “Twenty percent of each jurisdiction’s allocation will be available immediately upon certification to the State that grant terms will be followed. Importantly, Treasury has provided strict guidelines for local governments to receive funds.”

That meant that Corpus Christi, population 362,294, receives only $3.6 million instead of the $18 million it should have received under the $55 per capita formula.

Hinojosa figures that Nueces County, which includes Corpus Christi, was entitled to $62.9 million. That dropped to $20.3 million under the $55 per capita formula. With Texas promising only 20% of that amount, Nueces County ends up with only $4.1 million, just 6.4% of what the county expected to receive.

Meanwhile, Travis County, population 1.3 million, received $221 million or $170 per capita.

“Travis County got 55 times more than Nueces County, even though it’s only four times the size,” Hinojosa said.

Nueces County Judge Barbara Canales said that she is working with the city of Corpus Christi to share funding already distributed and any additional funds that the state will provide.

“It just worked incredibly unfairly to Nueces County,” she said. “We’re still in Hurricane Harvey recovery mode.”

The 12 biggest counties, for their part, lobbied in a May 13 letter to the governor for more money, because they have 63% of the state's population, and had 68% of the state's COVID-19 cases.

Two of Hinojosa’s neighboring clients in the Rio Grande Valley reflected the inequity of distributions.

Hidalgo County, population 868,707, was allotted $151 million, while neighboring Cameron County, population 423,463, was granted only $4.64 million.

Thus, Hidalgo County, whose seat is McAllen, got $174 per capita, while Cameron, whose seat is Brownsville, got $11 per capita. Both counties have lower-income populations in a border trade zone hit hard by the coronavirus.

“Those individuals in those 242 counties and cities under a population of half a million have the same exact needs,” Cameron County Judge Eddie Trevino Jr. told a May 13 press conference. “The (COVID-19) numbers in Cameron County have been higher than one might have anticipated based upon our population. Needless to say, Cameron County along with many of the other cities and counties throughout the entire state have expended financial resources dealing with the COVID-19 pandemic.”

Hinojosa said that Abbott’s letter adds red tape to the process of applying for the full funding, and the smallest counties have the least resources for such bureaucracy at a time they are suffering economic hardship. Moreover, the funding can only be used for services or equipment directly related to the pandemic.

“When the race for the money began, the big boys were out the gate on thoroughbreds, and the little guys weren’t even ready,” Hinojosa said. “In fact, they found out they were riding donkeys.”

The National League of Cities is leading efforts to push Congress toward more relief for cities of all sizes.

Texas is one of 32 states withholding federal funding to local governments approved under the CARES Act that was signed into law March 27, according to a League survey.

The survey completed May 18 found most municipal governments have received “no indication when, or if, funds will ever be made available,” the NLC said.

According to the Treasury, only 171 cities and counties nationwide qualified for direct federal grants.

Mike Wallace, program director for community and economic development at the NLC, said the problem with distributing the money is twofold.

“The challenge here is because an insufficient amount of funding was allocated in the first place, and because there were regulatory requirements and administrative hurdles, it’s slowed the process down,” said Wallace.

The House has approved another round of $915 billion in state and local aid under the HEROES Act, but the Senate has not acted.

“The purpose of the survey was to show congressional lawmakers that the CARES Act funding through the Coronavirus Relief Fund is being slowly distributed and is insufficient,” said Wallace. “Not every senator is there yet and feeling that urgency, so we have some work to do yet.”

Wallace said states would be quicker to release federal funding to municipal governments if there was confidence that another round of federal aid is on the way.

“The ultimate solution isn’t getting the states to act more quickly on the Coronavirus Relief Fund,” he said. “The ultimate solution is to allocate a more sufficient level of support for our states and local governments.”

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State and local finance Texas Coronavirus CARES Act