The John Locke Foundation is leading a national effort to highlight a critical flaw in the $2 trillion federal relief package tied to the COVID-19 pandemic. Fixing the flaw could help state governments avoid unsustainable budget spending increases.
Working with the Nebraska-based Platte Institute, the two organizations drafted a letter to bipartisan congressional leaders. More than a dozen other state-based public policy think tanks from Maine to Nevada have signed on.
The letter asks Congress to amend a $150 billion Coronavirus Relief Fund. That fund is a key component of the larger $2 trillion CARES Act.
The relief fund allocates at least $1.25 billion for every state. States are slated to get more money based on population. Part of each state’s money goes to local governments.
“As written, however, the fund provides little actual relief for state budgets but instead all but compels them to devise new spending that can be attributed to” COVID-19, according to the letter.
“Congress needs to address this unintended outcome quickly by providing states and local governments the flexibility to use money from the Coronavirus Relief Fund 1) to offset lost tax and fee revenue that would otherwise have paid for ordinary operating expenses between March 1 and December 30, or 2) to provide one-time tax relief to individuals and businesses to revive the local economy,” the letter continues.
The letter reminds congressional leaders that new COVID-19 costs linked to Medicaid and public education already are covered by other federal measures. Additional new costs tied to the coronavirus pandemic “would not come close to the full amount appropriated except through budgetary gluttony,” according to the letter.
Rather than force states to add new spending, an amended Coronavirus Relief Fund could help states address billions of lost dollars in tax and fee revenue that “cannot be recovered.”
“We ask Congress to allow states the ability to use their Relief assistance in the most prudent and least disruptive way possible,” the letter concludes.
“As written, the language of the law, which only covers new spending, doesn’t meet the spirit of the law, which is to help state and local governments meet the needs of their citizens,” said John Locke Foundation CEO Amy O. Cooke. “State and local governments need flexibility to use the billions of dollars they will receive through the Coronavirus Relief Fund in the CARES Act. Congress should address this flaw with the next relief bill instead of simply throwing more dollars at the states.”
“The John Locke Foundation is honored to partner with the Platte Institute and all signatories to bring this issue to the attention of Congress.”