States and Cities Scramble to Spend $350 Billion Stimulus

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WASHINGTON – When Austin Mayor Steve Adler heard that the Biden administration was planning to give billions of dollars to states and communities under the $ 1.9 trillion pandemic relief package, he knew exactly what he was doing with its cut wanted to do.

The Texas capital’s remarkable growth, fueled by a technology boom, has long been overshadowed by an increase in homelessness. As a result, local officials had cobbled together $ 200 million for a program to assist Austin’s 3,200 homeless people. When the aid package was passed this spring, the city government quickly poured 40 percent of its revenue, about $ 100 million, into reinforcing these efforts.

“The propensity is to distribute money like peanut butter to help many people in need of relief,” Mr. Adler, a Democrat, said in an interview. “But nobody really gets everything they need when you do that.”

The stimulus package that President Biden signed in March was supposed to stabilize state and city finances drained by the coronavirus crisis and provide $ 350 billion to mitigate the effects of the pandemic, with few restrictions on how the money is used.

Cash starts pouring in three months after its passage – $ 194 billion to date, according to Treasury Department data – and officials are allocating funds for a range of endeavors, including keeping civil service on the payroll, supporting the fishing industry, and improving the quality of life Broadband access and help for the homeless.

It’s not that all places are rushing to do the most ambitious things, because the first thing they have to do is replace lost revenue, ”said Mark Muro, senior fellow of the Brookings Institution, a non-partisan Washington think tank. “But this program is much more flexible than in previous stimulus packages, so there is more potential for creativity.”

Local decisions gain national urgency as the Biden government negotiates a bipartisan infrastructure package with the Republicans in Congress. Some Republican lawmakers want funds from previous aid packages to be reused to pay for infrastructure, arguing that many states are in far better financial shape than expected and that the money should be better used.

The government, sensitive to these concerns, has begun changing the rules of the program to allow the money to be more widely spent. In May, the Treasury Department announced that states could use their funds to pay for lotteries to promote vaccinations. In June, President Biden urged local governments to consider using the money to tackle the recent surge in violent crime, which his staff see as a serious political threat to the 2022 midterm elections.

For the most part, local officials focused on repairing the damage over the past year and a half.

Maine officials want to spend $ 16 billion to bolster the fishing industry, which faces a combination of lobster shortages and hungry consumers after more than a year of lockdown. Alaska is already pouring money into its fishing sector.

In North Carolina, concerns are more terrestrial: the governor plans to channel $ 45 million in aid into the motorsport sector, which suffered a blow when the NASCAR pandemic halted.

In conservative states like Wyoming, which did not have major budget deficits during the coronavirus, officials were able to spend a large part of their money on infrastructure improvements, especially rural broadband.

Places like Orange County, California, which have invested significant funds in fighting the spread of the pandemic, are using much of their money to pay for huge community vaccination campaigns. And the midsize cities that make up the county – Irvine, Garden Grove, and Anaheim – are using most of their $ 715 million to stuff virus-ravaged budgets.

Updated

July 6, 2021, 8:19 p.m. ET

Last week, New York City passed its largest budget ever, about $ 99 billion backed by $ 14 billion in government pandemic aid that goes into almost every facet of the city’s finances, like an infusion of cash that to fill budget gaps and a range of new programs including youth work initiatives, college scholarships and a $ 1 billion backup fund for health emergencies.

Local officials, especially Democrats, have tried to use at least some of the profits to address chronic social and economic issues that the coronavirus has exacerbated.

After a series of Detroit community meetings, Mayor Mike Duggan and the city council embarked on a plan that roughly halved the city’s $ 826 million payout, with about $ 400 million offsetting Covid-19 losses and 426 $ Million towards a variety of job creation programs, home repair grants, and funding to revitalize derelict neighborhoods.

In Philadelphia officials are considering using $ 18 million of the new aid to test a “universal basic income” pilot program designed to help poor people. This is one of the uses specifically suggested in the administration guidelines. Several other major cities, including Chicago, are considering similar plans.

The Cherokee Nation, which receives $ 1.8 billion of the $ 20 billion for tribal governments, is replicating the law’s signature initiative – direct cash payments to citizens – by sending $ 2,000 checks to approximately 400,000 members of the tribe in multiple states sends.

The $ 350 billion program has sparked legal battles with officials in many Republican-led states battling one of the few restrictions on the use of the money, a ban on using it to subsidize tax cuts, and partisan arguments over which Projects should have been carried out given priority.

And the money created partisan conflicts. Wyoming Governor Mark Gordon, a Republican, announced this month that the state would use only a fraction of the roughly $ 1 billion it should receive this year on emergency spending and would discuss how the rest should be used .

“These are dollars that Congress has borrowed from generations to come,” he said in a statement this spring.

The idea of ​​the federal government distributing such huge sums of money was indicted from the start. Republican lawmakers successfully blocked a large state and local package during the Trump administration, denouncing it as a “bailout for the blue state” helping fiscally irresponsible local governments.

Not a single Republican in either House of Congress voted for the bill. Yet the vast majority of Conservative state officials have welcomed the aid without a fuss. In general, Republican governors and officials tend to finance economic development and infrastructure improvements, particularly broadband modernization in rural areas, rather than funding social programs.

If the government updates funding guidelines this summer, it will likely ease restrictions on internet-related projects at the behest of Republican civil servants, a senior White House official said.

One of the country’s most ambitious plans is formulated by Indiana, a Republican-controlled state that is spending $ 500 million of stimulus money on projects aimed at curbing decades of brain drain from post-industrial cities.

“It’s huge – money was found – nobody thought it would be there,” said Luke Bosso, chief of staff at the Indiana Economic Development Corporation, which has worked on the effort for years.

While the legislature in Washington is debating the scope of a new infrastructure law this year, the package passed in March already represents a large down payment for a large number of infrastructure projects.

Christy McFarland, director of research for the National League of Cities, said many cities across the country are preparing to pour money into infrastructure projects delayed by the pandemic and more affordable housing and spending on core needs like water, Canal and broadband.

However, she said she also sees creative ideas like recurring payments to the poor and investing in supporting remote work as cities look to expand their safety nets and modernize their workforce.

“We are also seeing churches that have never recovered from the Great Recession have the opportunity to think much bigger,” said Ms. McFarland. “They ask what they could do that would be transformative.”

The slow recovery from the last recession was a driving force behind the White House push. Mister Biden sought to avoid a mistake that hampered the pace of the recent recovery – and underestimated the strain that sluggish local governments would have on the national economy. Gene Sperling, a former Obama adviser who is now overseeing Mr. Biden’s relief efforts, said that not helping local governments means “about 2 percent versus 3 percent annual economic growth.”

The effort also serves Mr. Biden’s political goals by bypassing national Republicans to build trust with voters in rural counties, small towns, and medium-sized towns in the Midwest and elsewhere.

“Something like this creates a space for a White House to talk to governors and mayors of both parties about the basic governance mechanisms that only cut through politics,” said Sperling. “It’s good.”