September 8 – Federal Update

September 8, 2020

Last week Republicans on the House Ways and Means Committee issued a press release that should be deeply concerning for states such as New York that find themselves absolutely desperate for emergency federal aid.  House W&M Republicans stated that, to date states have spent just 20% of the money that has been appropriated by Congress for state and local assistance during COVID.  The NYS Council has a reliable source that has tracked NYS spending of federal dollars during COVID.  Our sources tell us more like 56% of all funds received by NY has been spent to date.  In any case, lawmakers are now vocalizing their deep reluctance to appropriate additional funds to states and localities.  It seems that further assistance for states is an ‘if’ rather than a ‘when’.  

The statement from House R’s can be viewed as positioning for negotiations to come on future emergency stimulus bills.  Having said this, it is clear that the momentum towards additional state relief is stalled and negotiations are at an impasse. 

The press release from Republicans on the Ways & Means Committee is below:

September 4, 2020

State and Local Tax Revenue Beats EstimatesNew data shows state, local tax collections significantly beat dire estimates from Spring 2020.

The Cato Institute finds that when accounting for a massive influx of federal dollars, state revenue has already substantially increased:

“While tax revenues have dipped slightly, federal aid to state‐local governments has soared. Total tax revenues fell $13 billion from the first to the second quarter. But federal aid rose $192 billion as cash from federal relief bills filled state‐local coffers. Total state‐local revenues (from federal aid, taxes, and other sources) rose from $716 billion in the first quarter to $893 billion in the second quarter.”

The Wall Street Journal considered similar data and came to the same conclusion:

“We examined recent monthly revenue reports for various states and, not surprisingly, Democratic states that maintained stricter and longer lockdowns appear to be recovering more slowly. But even they are raking in more cash than they let on.”

State and local financial crises have not materialized and Congress can respond accordingly should one develop. But dumping an additional nearly $1 trillion into state and local governments without more data would be both reckless and irresponsible.

State Governments Still Control $84 Billion in Unspent Federal AidStates and localities haven’t even spent the aid they’ve received.

States Admit They Haven’t Spent Their Aid: State governments have reported to the Treasury Inspector General that they have only spent 24% of money directly received and still control $84 billion in unspent funds. Yet Democrats are demanding more aid.

Congress Has Also Provided Other Types of Federal Aid:  States have only reported to the Treasury Inspector General their use of aid that includes Coronavirus Relief Funds and not the other types of aid Congress provided to states and localities (i.e., education relief, housing relief, unemployment insurance relief, etc.).

The Most Effective Aid is Aid That’s Spent: State and local governments may have “committed” funds to relief efforts, but the economic impact will only be felt once that money has been spent. Once that happens, Congress can assess that impact and review the latest progress on revenue collection to determine the necessity of additional aid.

Republicans believe in common-sense solutions, not bailouts. Republicans believe in basing federal aid on actual data and real-world conditions, not political favoritism and bad management. Congress should not consider additional aid to state and local governments unless and until existing funds are spent and data shows that more aid should be considered.