With Congress preparing to debate relaxing restrictions on emergency aid to state and local governments, Gov. Ralph Northam is sending almost $645 million in federal funds to localities to help them weather the coronavirus crisis and its economic repercussions.
The money is the second half of the $1.3 billion in federal aid under the CARES Act that Virginia is allocating for local governments to use under current rules that limit spending to expenses directly related to combating the spread of COVID-19. The state distributed $644.6 million to localities in early June, based on population.
Together, the allocations represent 45% of the $3.1 billion that Virginia received from the federal government last spring with the recommendation that it use at least 15% of the money to help localities. Only Fairfax County, with more than 1 million people, received a $200 million payment directly from the federal government under the CARES Act.
“We are giving them almost half of Virginia’s entire allocation,” Northam said Tuesday. “That’s a big deal.”
However, the governor also challenged local governments “to step up” and use their share of the money to help entities within their borders to cope with the COVID-19 emergency.
“This money will help them do the things that we all want to see — from rent assistance and eviction protection, to food security, to [personal protective equipment], and tools to help educate children,” he said.
Northam said the state will require localities to be accountable for how they spend money “to make sure this gets done the right way.”
Congress is girding for negotiations over a new stimulus relief package that, at a minimum, appears likely to give state and local governments some of the flexibility they have sought to use the money to compensate for lost tax revenues, including taxes on sales, meals and lodging, and event admissions that local governments rely upon to reduce pressure on property taxes.
“We have been begging them for flexibility, so that’s good,” Senate Finance and Appropriations Chairwoman Janet Howell, D-Fairfax, said Tuesday. “But we also have to have more money.”
“They are just not being realistic about the needs of the people of this country,” Howell said.
The $1 trillion HEALS Act that Republican leaders in the U.S. Senate introduced on Monday does not include any additional money for state and local governments, only loosened rules for using the $150 billion reserved for them in the CARES Act. In contrast, Democrats in the House of Representatives included an additional $1 trillion for state and local governments in the HEROES Act adopted more than two months ago, or about one-third of the $3 trillion legislative package.
Virginia has obligated about $500 million of the $1.8 billion in federal aid it received under the CARES Act for its expenses in dealing with the coronavirus pandemic, primarily for COVID-19 testing and contract tracing of positive cases, as well as protective gear for health care and public safety workers and a Medicaid stipend for nursing homes to use to pay staff.
The state also has used about $91 million of the federal money to pay additional expenses of state agencies in dealing with the health and economic crises. Northam also has reserved $50 million for mortgage and rental housing relief and $70 million for a new grant program for small businesses that he announced on Monday.
State officials say local governments have borne the brunt of a sharp decline in consumer spending that has reduced sales tax revenues, as well as tax revenue from food and beverages, lodgings and admissions that has disappeared because of the near shutdown of the state’s hospitality industry.
“What I’m hearing from local governments is they’re desperate for the money and they feel that doing it on population is a fair way to go,” Howell said.
Secretary of Finance Aubrey Layne said the state’s decision to allocate the money based on population will help all localities, especially if Congress loosens the rules on how they can spend it.
However, the state will require local governments to certify that they will abide by federal restrictions on how the money can be used, and complete an online survey to report how they have spent the money distributed to them last month and how they plan to use funds in the second round.
Localities will have until Aug. 10 to complete the certification and survey, and the state will send the money within five business days of receiving the information.
“The whole idea is to be accountable,” Layne said. “It’s also to use the money in the best way.”
House Appropriations Chairman Luke Torian, D-Prince William, said the distribution of money to localities “is going to be very helpful.”
Torian said Congress also can help state and local governments as it considers the next emergency relief package.
“I’m not sure if they are going to provide us more new resources,” he said. “If not, I hope they provide us some flexibility.”