Gottheimer Leads Bipartisan Effort Calling on U.S. Treasury to Revise Guidelines to Let State & Local Governments Use CARES Act Funding to Fill Revenue Gaps, to Ensure States Distribute Funding to Smaller Municipalities

Jun 11, 2020
Press

Current guidelines penalize states and local governments responding to COVID-19

On June 11, 2020, U.S. Congressman Josh Gottheimer (NJ-5) led a bipartisan request from 11 Members of Congress to urge the U.S. Treasury to amend guidelines to allow state and local governments to utilize CARES Act relief to fill their revenue gaps and to ensure states distribute relief to smaller municipalities.

The bipartisan Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27, 2020, and it created a $150 billion Coronavirus Relief Fund for state and local governments. The U.S. Treasury Department is currently barring states from utilizing these funds to address state budget shortfalls associated with the spread of COVID-19.

“It is urgent that the Treasury Department modifies its recently released guidance to allow state governments to utilize the needed relief and resources made available by Congress,” the Members wrote in a letter this week to U.S. Treasury Secretary Steven Mnuchin. “Further guidance would alleviate uncertainty, allowing for the more efficient deployment of resources. While we appreciate the broad interpretation of what is considered a ‘necessary expenditure’ within the CARES Act when it pertains to the use of funds to assist state governments, these funds must further be allowed to assist in revenue shortfalls.”

The Members continued, “The revenue shortfalls will also be felt by county and municipal governments, and we request that you develop guidance for the state recipients of the funding consistent with the intent of Congress that local governments with populations below 500,000 should receive their fair share of the remaining funding allocated to the state.”

As reported by the Center on Budget and Policy Priorities (CBPP), state revenues are plummeting — whether sourced from income tax, property tax, sales tax, or other methods. 

The CBPP estimates that states will see a $765 billion shortfall in revenue over the next three years alone, not including strains on municipal budgets.

More than 44 million Americans have filed jobless claims since mid-March, and economists believe that there are millions more still working through the state unemployment systems to be added to this number. This mass shift in employment has caused immense strain upon states and their revenue streams, which will have vast negative impacts for years to come.

Along with Gottheimer, the letter is also signed by Representatives Tom Reed, Joyce Beatty, Jim Costa, Brian Fitzpatrick, Bill Foster, Vicente Gonzalez, Denny Heck, Carolyn Maloney, Chris Smith, and Juan Vargas. 

A copy of the letter is available HERE, the text of which is provided below.

Honorable Steven T. Mnuchin

Secretary

U.S. Department of the Treasury

1500 Pennsylvania Avenue N.W.

Washington, D.C. 20220

Dear Secretary Mnuchin:

As the Department of Treasury implements requirements stipulated in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (P.L. 116-136), we urge you to abide by Congressional intent in the legislation and ensure that funds are made available to state and local governments to bridge revenue shortfalls caused by the novel Coronavirus (COVID-19) pandemic. These funds are vital for allowing states that, through no fault of their own, are facing unprecedented hits to their revenue and ability to maintain even basic public services for our constituents. It is urgent that the Treasury Department modifies its recently released guidance to allow state governments to utilize the needed relief and resources made available by Congress. As reported by Center for Disease Control and Prevention, the majority of states are dealing with thousands of COVID-19 cases among their citizens, including the hardest hit of New York with 380,892 reported cases and New Jersey with 165,346 cases, as well as Michigan and Louisiana with 65,182 and 44,030 cases, respectively, as of June 11th, 2020. States must be able to focus on fighting this pandemic and not have the added worry that their state-level resources will fall short.

The COVID-19 pandemic has caused an unrivaled global economic crisis. In response, Congress passed the bipartisan CARES Act, signed into law by President Trump on March 27, 2020, in an effort to lessen the blow and ensure that the American people are prepared to come roaring back into the recovery phase of this crisis. As reported by the Center on Budget and Policy Priorities (CBPP), state revenues are plummeting, whether sourced from income tax, property tax, sales tax, or other methods. CBPP estimates that states will see a $765 billion shortfall in revenue over the next three years alone, not including strains on municipal budgets. Further, as reported by the Department of Labor on June 11th, 2020, more than 44 million Americans have filed jobless claims since mid-March, and economists believe that there are millions more still working through state unemployment systems to be added to this number. This mass shift in employment has caused immense strain upon states and their revenue streams, which will have vast negative impacts for years to come.

The guidance provided by Treasury, although welcome, has created further questions with state governments. This includes the interpretation of what employees are considered covered by the Coronavirus Relief Fund and to what extent funds that may have been originally budgeted under one account may be shifted to others to more efficiently combat this pandemic and will be eligible to receive reimbursements. Further guidance would alleviate uncertainty, allowing for the more efficient deployment of resources. While we appreciate the broad interpretation of what is considered a “necessary expenditure” within the CARES Act when it pertains to the use of funds to assist state governments, these funds must further be allowed to assist in revenue shortfalls. Due to the crisis, Governor Murphy of New Jersey has proposed a $1.3 billion state budget cut, Ohio Governor DeWine has proposed a 20 percent cut in spending, and New York Governor Cuomo estimates that state revenue will decline $13.3 billion below forecasted amounts over the next three years. Other states such as Colorado and New Mexico are estimated to have double-digit percentage declines in their general fund revenue for years to come. The revenue shortfalls will also be felt by county and municipal governments, and we request that you develop guidance for the state recipients of the funding consistent with the intent of Congress that local governments with populations below 500,000 should receive their fair share of the remaining funding allocated to the state.

Following Congressional intent and allowing federal funds to fully assist state and local government needs is vital as we continue to fight against this pandemic. We look forward to your immediate response on this important matter and urge you to utilize all of the tools available to continue to assist our communities.

Sincerely,

MEMBERS OF CONGRESS

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