Panicked cities asked the feds for money during the pandemic. Months later, some are slow to spend.

·17 min read
The financial toll of the pandemic created an emergency but now some governors and mayors are slow to get American Rescue Plan money out the door.
The financial toll of the pandemic created an emergency but now some governors and mayors are slow to get American Rescue Plan money out the door.

The tone was urgent when eight governors and mayors visited the Oval Office in February: Please help us recover from the economic devastation left by COVID-19.

President Joe Biden called it a “crisis.” New York Gov. Andrew Cuomo described the needs as “critical.” Miami Mayor Francis Suarez said Florida cities were in “agony and are crying out for help.”

Yet now that states, cities and towns across America have been wired $200 billion in emergency aid – one of the largest federal-to-local stimulus efforts in history ­– many are in less of a rush.

Only half of the governors and mayors who visited the Oval Office on Feb. 12 to urge passage of the $1.9 trillion American Rescue Plan have decided how to spend more than a small share of the money.

Four have designated all the money, including New York, which approved a budget committing all $12.7 billion to offset lost revenue and a budget shortfall. Some have allocated a tiny fraction so far, including Arkansas, which has set aside just $30 million for rural broadband of its nearly $1.6 billion. New Mexico and Miami have touched none of it.

Across the country, the track record is about the same: 22 states and Washington, D.C., have yet to pass legislation or take executive action laying out how they will use the money, according to the National Conference of State Legislatures.

Pleas for help have run headlong into the glacial pace of state and local governments, many of them bickering over executive versus legislative decisions, hosting hours of community listening sessions and scouring hundreds of Treasury Department pages laying out allowable uses of the money.

That pace also reflects an unexpected reality: Many states rebounded faster than expected.

“I think you’re going to see that this money is going to move out very slowly across the country,” said Arkansas Gov. Asa Hutchinson, a Republican who attended the February meeting on behalf of the National Governors Association. “I never sensed the urgency of this package; I know it was important for many other states.”

The $350 billion tourniquet provided to states and localities in Biden’s American Rescue Plan was the largest federal investment in state and city government since President Lyndon Johnson’s Great Society.

As the bill was debated, Republicans in Congress slammed it as an unnecessary bailout and “liberal wish list” for cities and states. Ultimately, it passed without a single Republican vote.

President Joe Biden and Vice President Kamala Harris met with governors and mayors on his COVID-19 economic relief plan in the Oval Office on Feb. 12.
President Joe Biden and Vice President Kamala Harris met with governors and mayors on his COVID-19 economic relief plan in the Oval Office on Feb. 12.

Today, the Biden administration argues the money was never intended to be spent all at once.

“It is not a sign of money not needed because it’s not all going out at the beginning,” said Gene Sperling, who is overseeing the administration’s implementation of the plan. “This is designed to be both for immediate crisis responses as well as two-or three-year money. It is designed for people to do serious, transformative things, and to help respond to challenges in the economy and bumps in the road, as there are in most recoveries.”

When state tax revenue tallies came out in June, the past year showed slight growth: about 1.4%, according to the National Association of State Budget Officers – hardly the doomsday scenario originally feared. Forecasts for the coming year are even rosier.

Still, the pandemic took a toll. Over the past two years, 40 states fell short of pre-pandemic revenue projections. More than 1 million jobs in state and local government were cut, according to the Treasury Department.

Suarez, who spoke of fiscal “agony” when he attended Biden’s meeting, was grappling last year with forecasts for a $25 million budget deficit. Instead, his city saw a $2 million shortfall. Miami will receive $138 million over two years under the American Rescue Plan.

Suarez plans to ask the City Council in September to approve using the money on affordable housing initiatives, broadband expansion, day care, gun violence awareness and parks.

“Almost all of it, we’re going to give it back to the people,” Suarez said in May.

After the Oval Office meeting, Miami Mayor Francis Suarez spoke at a White House press briefing as Biden Press Secretary Jen Psaki and Detroit Mayor Mike Duggan listened.
After the Oval Office meeting, Miami Mayor Francis Suarez spoke at a White House press briefing as Biden Press Secretary Jen Psaki and Detroit Mayor Mike Duggan listened.

Jeff Williams, then the Republican mayor of Arlington, Texas, attended Biden’s meeting on behalf of the U.S. Conference of Mayors. In a February interview with USA TODAY, he likened the pandemic to a flood that would typically trigger federal emergency assistance with no questions asked.

His mayoral term ended last month, and, so far, Arlington has allocated only $6.1 million of its $81.5 million over two years – just over 7% – to fill police, firefighter and other positions that remained vacant after a pandemic hiring freeze, according to the newly elected mayor, Jim Ross. Despite the pandemic, Arlington last September cut property taxes for the fifth consecutive year.

Ross said “decisions have yet to be made” about the remaining rescue plan money.

In recent weeks, the Biden administration made the rescue funds a key plank of its response to rising gun violence, encouraging mayors to use their portions to hire more police officers and improve public safety. The White House provided 28 examples of cities using or considering money for law enforcement.

White House Press Secretary Jen Psaki said last week that the administration is confident the relief money for cities and states is being well-spent, emphasizing that local leaders prioritized “keeping employees on the job and cops on the beat” during negotiations.

“It sounds like there are some different case-by-case scenarios that have made it more challenging for certain governments and localities,” Psaki said. “There is of course a range of options that cities and localities have for using the funding, and we wanted to provide that flexibility on purpose because one size doesn’t fit all for cities, towns and localities.”

‘Jackals at the kill’ until the pace slowed down

Money from Biden’s aid package does not have to be obligated until 2024 or spent until 2026, far more leeway than the one-year deadline to spend last year’s CARES Act funds. Unlike CARES dollars, reserved for COVID-19-related expenses, governors and mayors have broad latitude with this infusion.

The 50 states and Washington, D.C. will split $195 billion; counties, cities and towns will get $130 billion; another $24.5 billion will go to territories and tribal governments.

Of the states that have settled on spending plans, uses range from replacing lost revenue and replenishing unemployment funds to $10 million for seafood marketing in Alaska and $50 million for beach and inlet restoration in Florida.

Critics say the lethargic rollout backs up early concerns that the money wasn’t needed, carrying the risk of overheating the economy by distributing a flood of cash to states – and people – just as the economy was starting to rebound.

Money began flowing to states and cities in May, setting off a chain reaction of thousands of decisions about how the cash would be spent. A second wave will go out in 10 months.

Many communities have a strategy to divide their efforts between rescue dollars that must be spent urgently and rebuild money for future investment, said Brad Whitehead, a nonresident senior fellow at the Brookings Institution.

“The bleeding isn’t as bad as we feared as far as straight-up urgency and the nightmare scenarios, so people want to be deliberate and smart,” Whitehead said. “You had this ‘jackals at the kill’ moment as this money arrived. But now it’s six to eight weeks later and everyone is slowing down and trying to be deliberate.”

Even though Biden’s rescue package got no GOP support in Congress, no Republican states or cities have rejected the money so far.

Arkansas Gov. Asa Hutchinson said aid was needed but the $350 million for states and cities was too much.
Arkansas Gov. Asa Hutchinson said aid was needed but the $350 million for states and cities was too much.

“You can’t hardly justify giving it back,” said Hutchinson, the Arkansas governor, who attended the White House meeting as vice chairman of the National Governors Association and is now the organization’s chairman. The group had said direct funding was needed but did not take a formal position on the American Rescue Plan.

While he supported some aid, Hutchinson split ranks with the others who gathered on Feb. 12, criticizing the $350 billion as too much. Since then, Arkansas has outperformed revenue projections. The state cut its budget last year by 5%, expecting the worst, the governor said, but ended up with a $1 billion surplus, the largest in state history.

Hutchinson got legislative approval in June to use $30 million to expand broadband in rural areas – 2% of the nearly $1.6 billion the state will receive over two years. He had proposed five times that much for broadband, calling it the state’s only truly urgent need.

Hutchinson has named a steering committee to make recommendations on how to dole out the rest of the money.

“We’re going to take a very thoughtful approach,” he said, “realizing this is a unique opportunity for long-term investments.”

‘How do you crank an economy back up?’

Political fights have gummed up many expenditure decisions.

After New Mexico Gov. Michelle Lujan Grisham attended Biden’s February meeting, she told local reporters that her first-ever Oval Office visit reflected the fact that “we’re in a federal emergency, both economically and still dealing with the public health component of the emergency with COVID.”

On her return from Washington, the Democrat found herself at odds with her state’s Republican-majority state Legislature, which had suggestions, including using more than $1 billion to avoid future payroll tax increases on businesses.

Grisham vetoed that in April, setting off a tug-of-war. She did not respond to several requests for comment.

Pat Woods, a Republican legislator, accused Lujan Grisham of being a “dictator who thinks she knows better than everyone, who wants to buy political favors.”

“We have a great need for these dollars, and they’re not in the hands of the people that need them: our small businesses,” Woods said. “How do you crank an economy back up?”

In Massachusetts, Republican Gov. Charlie Baker and the Democrat-controlled Legislature also have fought over the $5.3 billion in state rescue money, prompting the Legislature to seize control of the funds and place them in a separate account while it seeks public input.

Maryland has seen far less drama, even though Gov. Larry Hogan – who attended the February White House meeting – is a Republican and the Legislature is controlled by Democrats. Hogan sat down with legislative leaders even before the federal rescue plan was passed.

The state will spend the largest chunk of its $3.7 billion in federal funds – $1.1 billion – to help replenish the pot of money that pays for unemployment benefits. Without the aid, Maryland would have to increase taxes on businesses to fill that coffer.

At the local level, complex local deal brokering has broken out in some cities.

Tempers have flared in Detroit, whose mayor, Mike Duggan, participated in Biden’s February meeting. He was ready to go with an early plan for how to use the money and distributed a framework in May. Duggan held 63 meetings with residents that drew 3,300 residents in all.

Daisy Jackson, with the Field Street Block Club, stands with residents of her community at a protest in front of Detroit Mayor Mike Duggan's mansion.
Daisy Jackson, with the Field Street Block Club, stands with residents of her community at a protest in front of Detroit Mayor Mike Duggan's mansion.

Battles with the City Council erupted, and 40 protesters showed up at Duggan’s home, postponing key decisions until June 29. Duggan took it in stride, saying he “valued the passionate conversations and feedback” and assuring local residents that the dollars will be spent to “improve the lives of Detroiters and our neighborhoods.”

Community members angry about the Pittsburgh mayor’s proposed plan flocked to a virtual public hearing this month.

“We have until 2024 to spend this money. ...What’s the rush?” said William Parker, who is running as an independent in the November mayoral race. “Where’s the equity layout? Who will receive contracts? What percentage will go to Black developers?”

Celeste Scott, a housing organizer, criticized the focus on homeowner relief rather than rental assistance.

“This money needs to be decided on by not the usual voices or the usual suspects but by the community at large,” Scott said. “We’re asking you to engage the community in a real way.”

‘Blowing it all the first two months... is not a smart way to go’

Nationwide, the economic outlook improved dramatically as social distancing guidelines eased and businesses reopened. But the recovery has been uneven, ranging from Alaska, which depends heavily on the oil industry – down 47% in tax collections during the first three months of 2021 compared with a year ago – to Michigan, up 60%.

Cities with the sharpest declines in tax revenue collection during the pandemic typically have spent their money the fastest, often using most of their aid to replace lost revenue and avoid cuts.

In Philadelphia, where revenue cratered last year, the city is using all its rescue money – $1.4 billion – to fill a $1.5 billion shortfall over the next five years.

“Without the money, we’d be cutting everything,” said Jim Kenney, the Democratic mayor of Philadelphia. “We may be laying off police.”

“I love the president, but I can kiss him,” Kenney said. “Because without this money, it would be a bad number of years.”

Some cities in financial trouble are nonetheless taking it slow.

Dayton, Ohio, saw tax revenue plummet nearly 10% during the pandemic. It’s still sitting on the first tranche of the $138 million it will get over two years.

“We know that we won’t get this funding ever in my lifetime,” Mayor Nan Whaley said. “We know this is a big deal. And so, blowing it all in the first two months, I think, is not a smart way to go.”

A Dayton home vacant for more than two years, according to neighbors, is among those the city hopes to demolish with funds from the American Rescue Plan.
A Dayton home vacant for more than two years, according to neighbors, is among those the city hopes to demolish with funds from the American Rescue Plan.

At Whaley’s request, the City Commission approved using the money on six categories, including neighborhood revitalization, core city services and recreational projects. Dayton is reviewing 1,500 citizen survey responses about the funds and plans to hold a dozen public meetings.

The city also is awaiting guidance from the Treasury Department on whether money can be used to demolish vacant homes and buildings that attract crime and discourage investment in a city where population has been dropping for decades.

The population in Dayton, Ohio, has been declining for decades. The mayor says abandoned homes foster crime and deter investment.
The population in Dayton, Ohio, has been declining for decades. The mayor says abandoned homes foster crime and deter investment.

Even government officials unsure about government rules

GOP attorneys general in at least 21 states have sued the Treasury Department for prohibiting states from using rescue money to offsettax cuts enacted after March 3. Recipients also can’t use it to make deposits to pension funds or pad their reserves.

The department published a 150-page interim final rule about how governments can spend the money. It continues to update guidance in a 42-page Frequently Asked Questions document and solicited comments through last week, drawing more than 970 responses.

Eligible uses include: spending on public health such as coronavirus mitigation and medical expenses; stemming economic damage by keeping public-sector workers on the payroll or boosting small businesses; replacing lost tax revenue; and additional pay for essential workers.

Local and state governments can invest in limited infrastructure – water, sewer and broadband – but not roads or bridges.

Many communities used the Treasury Department forum to seek clarifications and more leeway. Representatives from Clackamas County, Oregon, want to fund disaster response, citing last year’s 200,000-acre wildfire and an ice storm in February. The Yankton Sioux Tribe in South Dakota called the March 3, 2021, start date for new expenses “an unnecessary restriction on tribes (that) interferes with our ability to expend funds.”

Damien Scoblink, borough manager in Berwick, Pennsylvania, wrote to plead for more flexibility on Berwick’s $7.2 million share of federal aid, raising concerns about having to send money back if the city makes the wrong call.

“On some items that aren’t obvious we’ll probably hang back a while to see if someone else gets in trouble,” he said. “From a purely COVID perspective, this money is nice to have, but not needed.”

In the meantime, Scoblink said, Berwick purchased a $277,590 street sweeper for the town of 10,000 people.

Republican Tennessee Gov. Bill Lee submitted a seven-page comment calling for more flexibility for water projects and railing about what he called “unduly narrow” and “burdensome and impractical” rules. Lee also has complained about prohibitions against funding highway projects, such as mending a crack found in Memphis on an interstate bridge over the Mississippi River.

Mesa, Arizona, Mayor John Giles is counting on wide latitude. Giles, a Republican who urged Congress to pass the rescue plan, said he intends to ask the City Council in August to allocate the first half of $105 million that Mesa will receive over two years.

His proposals include converting vacant hotels into housing for homeless people, providing utility assistance to buffer higher electricity costs, offering premium pay for essential workers, funding after-school scholarships and launching initiatives to boost tourism.

Giles blamed evolving federal guidelines for slowing the rollout.

“We don’t want to hurry and spend it,” he said, “and then get the next memo from Treasury and find out that we spent it on something they’re going to ask us to reimburse them for.”

Public safety and policing a top priority

In January, 425 mayors signed a letter from the U.S. Conference of Mayors lobbying Congress to pass Biden’s rescue plan.

“The strength and depth of support is a reflection of just how dire the situation is in many cities, where local leaders are having to make painful budget decisions including layoffs, furloughs, and cuts to critical services,” the letter said.

In interviews, many identified public safety and policing as a priority to counter law enforcement job cuts and an uptick in violence.

Dallas has yet to allocate any rescue money, but Mayor Eric Johnson, a Democrat, said that's because the city’s next budget doesn’t begin until October. Of the $355 million Dallas will get over two years, Johnson wants to earmark up to $100 million for public safety, including hiring 275 more police officers, increasing officer pay and bolstering the city’s 911 call center.

“It’s a much-needed shot in the arm,” Johnson said. “Last year we had more homicides in Dallas than we’ve had since 1998, and we’re on pace to have even more this year.”

Atlanta is among the cities that have reached deals to designate its aid.

After Mayor Keisha Lance Bottoms met with Biden in February, she said her city’s immediate needs included filling a big budget hole and addressing an increase in violent crime and domestic violence. “Obviously our operating budgets are all taking a significant hit,” she told reporters.

Of the city’s nearly $171 million in federal funding, 72% is going toward government services affected by revenue reductions, including paying for 250 new police officers, 10,000 streetlights in violence-prone areas and a program that diverts low-level crime responses from police to social workers, according to the city. Another 4% will go directly to violence reduction programs.

Oklahoma City Mayor David Holt was among 32 GOP mayors who broke with Republicans in Washington by publicly supporting Biden’s rescue plan. The city’s sales tax collections sank 5% last year amid the pandemic, forcing 11% cuts in all nonpublic safety departments and a freeze on hiring new police officers and firefighters.

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Weeks before the federal aid package passed, Holt called the direct aid a “no-brainer.” Today, his city’s fiscal situation has improved markedly, buoyed by three months of record sales tax collection. The city has received the first half of its share of $125 million in rescue aid, but Holt hasn’t asked the City Council to appropriate it.

“There’s not a sense of urgency, to be honest with you,” he said. “It’s not the crisis that it was when we were dealing with CARES Act dollars a year ago.”

Holt acknowledged he was singing a different tune not long ago: “That was January. It’s a different story now. … Things turned around fast.”

Still, he said the money isn't a federal waste and that his city will use it for something that will "impact people’s lives.” He expects to submit a proposal to the council within two months. One use, he said, could be to replace capital infrastructure funds depleted during the pandemic.

“Whereas I can’t get a time machine and hire a police officer in June in 2020,” he said, “I might be able to get in a time machine and backfill some capital expenditures that those revenues would have otherwise gone to."

This article originally appeared on USA TODAY: COVID relief spending decisions uneven amid politics, bureaucracy

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