DES MOINES, Iowa – On Tuesday, U.S. Rep. Cindy Axne, D-Iowa, along with U.S. Rep. Peter King, R-N.Y., introduced a bill that would bail out states and local governments with budget shortfalls due to COVID-19. The federal revenue provided by the bill would prevent cuts to essential services, including emergency response, public safety, education, and local infrastructure repair.
The legislation entitled the “Coronavirus State and Local Financial Assistance Act” creates a new program with $500 billion to issue grants to state and local governments to offset lost revenue. The grant awards would be based on the city or state revenue estimates before COVID-19 and would make up for the full shortfall in income, property, sales, and other taxes for the remainder of the year.
Axne notes that state and local governments face significant cuts to their budgets for next year, and without support, might be forced to lay off thousands of teachers, firefighters, and police officers across Iowa.
“I’ve spoken to our mayors, councilmembers, city planners, and county leaders across central and southwest Iowa – and all of them have expressed deep concern about their fiscal health after coronavirus required them to halt many of the activities that help support their vital services,” said Rep. Axne. “Our firefighters, teachers, police officers, and other municipal workers – and the towns they support – should not have to bear the burden of budget cuts after taking the necessary steps to slow the spread of coronavirus in Iowa. With this legislation, we can ensure our local governments and state are supported along with our small businesses, agricultural economy, and health systems.”
Her office says the grant program if approved, utilizes existing funding structures between the U.S. Department of the Treasury and states to collect information and disburse the grants to expedite assistance to localities.
States would collect estimates of revenue loss from local governments below the state level, including counties, towns and cities, and school districts. The resulting grant from the Treasury Department would be made based on the total revenue decline for the state and its local governments, with municipalities receiving their funding from the state.
The legislation, if passed in the House of Representatives, would likely face stiff resistance in the U.S. Senate, and it is uncertain that President Donald Trump would sign it.
Last week, House Speaker Nancy Pelosi and House Democrats floated $1 trillion for state and local governments in an upcoming coronavirus spending bill. Senate Majority Leader Mitch McConnell, R-Ky., repeatedly said he opposed the idea. Trump on Twitter asked, “Why should the people and taxpayers of America be bailing out poorly run states (like Illinois, as example) and cities, in all cases Democrat run and managed, when most of the other states are not looking for bailout help?”
In April, U.S. Senators Bob Menendez, D-N.J., and Bill Cassidy, R-La., proposed a similar bill.
Some are not certain additional spending is needed.
“While we appreciate the recognition that state and local governments are going to be missing critical and expected revenue, I’m not certain that yet another round of federal relief dollars is needed at this time. If Congress would simply give state and local governments flexibility to use money from the CARES Act to make up for lost tax revenue or provide temporary tax relief to its citizens, a state like Iowa may be able to weather this pandemic without more money from Washington right now. As it is currently, Congress has prohibited using CARES Act dollars to cover items that already existed in a state’s budget,” Chris Ingstad, president of Iowans for Tax Relief, said.
“We’ll dig in deeper to this new round of proposed spending from Rep. Axne. In the meantime, we’d encourage Congress to consider the bi-partisan FLEX Act introduced last week. The FLEX Act aims to allow state and local governments to access previously approved federal relief funds to offset lost revenue due to the health emergency from COVID-19,” he added.
