States, cities asking for $750 billion in emergency federal grants

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President Trump, who was asked whether he will support the governors’ request to Congress, said Monday his administration’s coronavirus task is “looking at things in phase four where they have, you know, where they talk about states and are also talking about hospitals.’’

States and local governments are escalating their requests for federal aid to offset revenue losses from the coronavirus emergency with combined requests for $750 billion in additional funding.

The National Governors Association is asking for a separate allocation of $500 billion apart from the $250 billion being requested by the National League of Cities and U.S. Conference of Mayors.

NLC President Joe Buscaino, a member of the Los Angeles City Council, told reporters in a conference call Tuesday that although “our ask is $250 billion,” local governments really don’t know what their eventual revenue loss will be.

President Trump, who was asked whether he will support the governors’ request to Congress, said Monday his administration’s coronavirus task is “looking at things in phase 4 where they have, you know, where they talk about states and are also talking about hospitals.’’

“They're talking about states who have been battered,” Trump said. “And they are also talking about hospitals and we're certainly willing to look at that.”

Trump was not questioned about the separate request for an additional $250 billion for local governments.

More than 1,900 out of 2,180 cities surveyed recently by the NLC and U.S. Conference of Mayors are expecting budget shortfalls.

Credit rating agencies all have issued blanket downgrades of the public finance sector as a result of the coronavirus emergency.

Mayor Nan Whaley of Dayton, Ohio told reporters her city already has furloughed 479 employees because of the drop in local income tax revenue that accounts for 74% of revenue. Akron, Cincinnati and Toledo are among the other major cities in Ohio that also have announced furloughs because of the drop in local income tax revenue.

Nearly one third of the 2,180 local governments responding to the NLC/USCM survey said they anticipate furloughing employees. A quarter anticipate lay-offs and more than half anticipate funding cuts for police. More than one-third expect cuts for firefighters and EMTs.

The $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, signed into law March 28 only provided $150 billion for direct state and local aid.

That $150 billion is restricted to only COVID-19 expenses and directly available only to cities with populations over 500,000 and counties with populations of at least 2 million.

That covers only 36 of the nation’s 19,000 cities, towns and villages, according to the NLC and USCM.

South Carolina is among 27 states where not a single city or county qualifies for direct aid under the CARES Act, said Lexington City Council Member Kathy Maness.

Although every state qualifies for aid, cities and counties with only 14% of the U.S. population also qualify for aid, Manness said.

Local officials are skeptical they will get a share of that aid, which they say is also insufficient to cover their dramatic drop in revenue.

“We must be allowed to use state stabilization funds for replacement of lost revenue and these funds should not be tied to only COVID-19 related expenses,” Maryland Gov. Larry Hogan, who is chairman of the NGA and his vice chairman, New York Gov. Andrew Cuomo, said in a joint statement over the weekend.

Hogan and Cuomo said the $500 billion they are seeking for state governments “must be separate from much-needed fiscal stabilization for local governments.”

The National Association of State Treasurers said in an April 10 letter to congressional leaders that 36% of aggregate state revenues in the April through June period are derived from elastic sources such as sales taxes, fares, fees and tolls that are subject to reductions during times of an economic downturn.

“As the crisis continues, revenue sources such as income taxes will also begin to fall as receipts begin to reflect furloughs and rising unemployment rates,” wrote Shaun Snyder, executive director of NAST.

Snyder said states “will likely need to retain certain of their reserves for a potential recession that may continue well beyond the end of the emergency declaration.”

NAST requested that Congress should provide less restrictive aid to states and remove matching requirements for state and local governments.

NAST also asked for temporary permission to use tax-exempt borrowing for working capital bonds and notes as well as restoration of advance refunding and an increase in the limit on bank qualified borrowing to $30 million.

Also on NAST’s list was elimination of the volume cap for private activity bonds issued for single-family and multifamily housing, restoration of direct-pay Build America Bonds, and reclassification of qualifying 2B municipal bonds as level 2A high quality liquid assets (HQLA) to attract large institutional investors.

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Coronavirus State and local finance NGA NLC USCM Washington DC
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