April 14, 2020
Today Sutherland Institute announced it would join the national coalition led by Nebraska’s Platte Institute and the North Carolina-based John Locke Foundation urging Congress to “provide additional flexibility for states and local governments in the federal CARES Act relief package.” Sutherland believes that with this flexibility, the federal funding would better complement the state’s current economic relief efforts and more effectively position state and local economies for a rapid recovery once the novel coronavirus pandemic is under control.
The letter calls for modifications to the $150 billion “Coronavirus Relief Fund” for states and local governments in the federal CARES Act. While each state is allocated at least $1.25 billion from the fund, the requirements of the program won’t currently help states with what may be their largest financial challenge resulting from COVID-19, which is a sudden and sharp reduction in most sources of tax revenue.
The language of the CARES Act specifies that funds may be used for emergency expenses … or for newly adopted programs. Federal guidance has confirmed that the legislation prohibits states or local governments from using the aid to pay for expenses that were already budgeted prior to the emergency.
In addition, local governments with populations under 500,000 are not currently eligible for aid from the Coronavirus Relief Fund.
The changes envisioned by the coalition letter include expanding the allowed uses of state and local aid from the CARES Act Coronavirus Relief Fund to include:
- Offsetting lost tax and fee revenue that would otherwise have paid for ordinary operating expenses between March 1 and December 30, 2020, and
- Providing one-time tax relief to individuals and businesses to revive the local economy.
These changes would allow federal aid funds to better complement state COVID-19 economic relief programs, such as the bridge loans being offered by the Governor’s Office of Economic Development to businesses harmed by measures taken to fight the pandemic. Rather than being forced to craft new programs and expand the government footprint in order to qualify for federal aid, the state of Utah and county/municipal governments should be allowed to use federal aid to backfill revenue losses driven by public health efforts to fight the pandemic.
The letter, delivered to U.S. House and Senate leadership, can be viewed below.
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