Bipartisan legislation to help states, counties and municipalities offset the revenue losses caused by COVID-19 shelter-at-home decrees is being hammered out by Congress.
Senator Cindy Hyde-Smith (R-Miss.) is an original cosponsor of the State and Municipal Assistance for Recovery and Transition (SMART) Act. The measure would provide $500 billion targeted to state and local governments with flexibility to use the funds to help mitigate the need for significant layoffs, tax hikes and interruption of essential services.
This flexibility is also applied retroactively to the Coronavirus Relief Fund in the CARES Act. Divided into three funding tranches, or portions, funding would be distributed by formula based on population, COVID-19 infection rates, and revenue losses.
“I’ve heard from many Mississippi counties and communities about the financial hardships they’re experiencing as costs related to COVID-19 consume more of their budgets,” said Hyde Smith. “All our state and local leaders want to avoid layoffs, disrupting essential services or raising taxes.
“The fact that cities and counties face layoffs, reductions in essential services, and even bankruptcies is cause enough for us to look at responsible ways to ensure people have access to the services they need,” she added. “This bill represents a good-faith effort to help communities, counties, and states weather the financial hardships of the coronavirus emergency.”
The bill would provide greater flexibility for local governments to use the funding and help avoid requiring states to expand the size of state government and create new, unnecessary programs just to be able to spend emergency COVID assistance.
Funding would be allocated through three equally divided tranches, with each state receiving a minimum of $2 billion combined from the first two tranches in addition to their allocation from the third tranche.
The three key tranches:
One-Third Based on Population Size. Funding allocated to all 50 states, the District of Columbia, and U.S. territories in proportion to each state or territory’s percentage of the U.S. population. Counties and municipalities each receive set asides for a combined total of one-third of their state’s allocation from this tranche. Funding for this tranche will be distributed to counties and municipalities based on each county and municipality’s proportion of the state’s population.
One-Third Based on Infection Rates. Funding allocated based on each state’s relative share of the nation’s infection rate. States with disproportionately high infection rates will incur significantly higher expenses and will likely need to continue stay-at-home orders for longer periods, leading to larger revenue losses. Counties and municipalities each receive set asides for a combined total of one-third of their state’s allocation from this tranche as well. Funding will be distributed to counties and municipalities based on each county and municipality’s proportion of the state’s infection rate for this tranche.
One-Third Based on Revenue Losses. Funding allocated based on each state’s revenue loss in proportion to the combined revenue loss of all the states from Jan. 1, 2020, through Dec. 31, 2020. States that took strong actions to curb the spread of the coronavirus should not face additional budget shortfalls for taking responsible action. Counties and municipalities will each get a share of one-sixth of their state’s allocation for a combined total of one-third of their state’s allocation from this tranche. Funding will be distributed to counties and municipalities based on each county or municipality’s revenue loss from Jan. 1, 2020, to Dec. 31, 2020, in proportion to the combined revenue loss for all counties and municipalities in the state over this period. This is designed to ensure that adequate funding flows to counties and municipalities that are disproportionately affected relative to their population.
Hyde-Smith advocated for expanding flexibility and eligibility use of funds to include the local cost share for FEMA Public Assistance grants, operational expenses, and that a state’s revenue loss calculation include costs associated with disaster declarations during the 2020 calendar year. Hyde-Smith also pushed to ensure the bill specifically prohibits states from using federal funds to contribute to state pension funds.
In developing the legislation, Hyde-Smith also supported dropping proposed population thresholds that would limit the availability of SMART Act resources for small, rural towns and counties. Unlike the $150 billion Coronavirus Relief Fund in the CARES Act that included a 500,000-population threshold, the SMART Act would provide direct federal assistance to communities and counties, regardless of its size.
U.S. Senators Bob Menendez (D-N.J.) and Bill Cassidy, M.D. (R-La.) introduced the bill after receiving input from cosponsors Hyde-Smith, Joe Manchin (D-W.Va.), Cory Booker (D-N.J.) and Susan Collins (R-Maine). Representatives Mikie Sherrill (D-N.J.) and Peter King (R-N.Y.) introduced a House companion bill.
Governors, mayors and county leaders from around the country have expressed their support for the SMART Act. The National Association of Counties, National League of Cities and National Governors Association are also supportive of this legislative effort.