Today, Rep. Cindy Axne (IA-03) and Rep. Pete King (NY-02) introduced new bipartisan legislation to create a new relief program to help state and local governments make up revenue lost due to the ongoing novel coronavirus (COVID-19) outbreak to prevent cuts to essential services including emergency response, public safety, education, and local infrastructure repair.
The Coronavirus State and Local Financial Assistance Act creates a new program funded with $500 billion to issue grants to state and local governments to offset lost revenue. The grants would be based on a locality’s revenue estimates prior to COVID-19, and would make up for the full shortfall in income, property, sales, and other taxes for the remainder of the year. State and local governments are facing drastic 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.”
“Having just completed a conference call with almost 100 local Mayors on Long Island, it is evident during this Coronavirus pandemic, that Mayors and local officials provide invaluable service and are on the frontlines closest to our constituents,” said Rep. King. “The pandemic has imposed major spending costs on them and reduced their revenues. They are in dire straits and we must give them the funding they drastically need.”
In an effort to expedite assistance to localities, the grant program would utilize existing funding structures between the U.S. Department of the Treasury and states to collect information and disburse the grants.
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.
While the CARES Act included $1.25 billion to support Iowa’s state budget through the Coronavirus Relief Fund – which also can support cities over 500,000 – smaller municipalities are ineligible for assistance from that fund.
Ensuring support for state and local governments is critical to ensuring that the massive short-term damage to an economy is prevented from turning into a longer-term problem. Evidence from 2009-2012 suggests that the recovery from the 2008-09 recession was significantly slowed by cuts to state and local budgets.
The legislation has been endorsed by the National Association of Counties, Iowa State Association of Counties and the National League of Cities.