Flexibility for CARES Act gaining momentum in Congress
The CARES Act has received criticism since its enactment in late March, however, there is a growing consensus of lawmakers seeing that a change is needed to the original legislation.
As written, the CARES Act only allows its $150 billion in aid to states and local governments to be used for new spending, not to replace state and local revenues lost as a result of the shutdowns. As we all know, most of the small communities in Nebraska are mostly being affected by the lost tax revenue and no new spending will help our communities recover or avoid a property tax increase next year. This is also the case in many states across America.
The Platte Institute and the North Carolina-based John Locke Foundation saw this problem with the legislation and have been leading a coalition of state policy groups asking Congress to provide additional financial flexibility for states and local governments in the federal CARES Act relief package.
Since then, there have been discussions on how to deal with the growing problem of state and local government finances – ranging from allowing states to go bankrupt to an additional $500 billion relief package. With the introduction of these extreme ideas, the conversation has circled back around to Platte’s idea of flexibility.
Late last week Rep. Bacon (R-NE) sponsored a bi-partisan FLEX Act allowing states and local governments more flexibility with the money the CARES Act has already sent to states. Yesterday, the US Senate joined in on the flexibility idea with U.S. Senators from Alaska leading the effort of a bipartisan bill titled the Coronavirus Relief Fund Flexibility Act. Another bill to amend the CARES Act to provide flexibility was also filed by Louisiana’s Sen. Kennedy (R-LA) earlier this week.
After a U.S. Senate GOP lunch this week, Lindsey Graham (R-SC) said, “I think the general consensus is, make the money in the pipeline more flexible and take a pause.” And now, even tribal governments are asking for more flexibility on how they can spend the funds. After reviewing the co-sponsors from the aforementioned bills, there are 14 states in support of the measure with many others quoted in news articles supporting the idea.
Co-Sponsor to Coronavirus Relief Fund Flexibility Act; Sen. Capito (R-WV) said, “Throughout this pandemic, I’ve been in regular contact with Governor Justice (WV), county commissioners, mayors and other state and local officials about the challenges they are facing in these uncertain times. One of those challenges is the lost revenue that the state, counties, and cities are experiencing because of this emergency, which has caused a real strain on their budgets.”
And in a news article Iowa Senator Joni Ernst said, “What we have already done through the CARES package, that Phase III bill, was provide dollars to our state governments that would be specific to COVID-19-related costs. And every governor is handling that a little bit differently, but what we have found is that there is very little flexibility within those dollars. We would like to see the dollars that have already gone into those states be used to help bridge gaps that communities are facing because of loss of revenue.”
She said some states “are sitting on money right now because they don’t have that built-in flexibility. And so within our own discussions here in Congress, we’d love to free up some of that money that has already been pushed out to the states for the use of local communities and counties.”