Federal aid is on its way to local governments, but there’s a catch: it can't be used to pay back local revenues lost as a result of the pandemic. It can only be used to pay for COVID-19 related expenses.
That means localities that rely on local taxation, like tourism taxes or meals taxes, won’t be able to use the money to fill the revenue gap left by the COVID-19 crisis. But they will be able to use the money to pay for COVID-19 expenses like bulk purchases of personal protective equipment.
Virginia U.S. Sen. Mark Warner (D) said on a phone call with local leaders in Prince William County Wednesday afternoon that the restrictions placed on federal aid for local governments is “craziness.”
“What was, I think, a crazy restriction was that somehow this was only to be used for direct COVID-19 expenses rather than lost revenues,” Warner said. “If you rely on a meals tax or other revenue sources, those have basically dried up.”
As a result, Warner said, local governments have tightened their budgets, resulting in hiring freezes and, in some cases, furloughing or laying off county staff.
“We're talking about laying off policemen, firefighters and EMTs because their other local revenues have dried up,” Warner said. “It is going to cause enormous harm in a lot of communities.”
In Prince William, the county imposed a hiring freeze, cut 40 new public safety positions from the county’s proposed budget, including police, sheriff and fire positions and dropped a planned 3% raise for county employees as a result of lost revenues.
Warner added that the Trump administration currently “doesn’t view that money to be flexible to be filling revenue holes.” But, he said, the same restrictions were not placed on other aspects of the federal aid package, such as the Paycheck Protection Program, which is designed to fill small businesses’ revenue holes.
“This is not at all the same restrictions that were placed when we give out PPP money. That is money that goes to help a business fill up a revenue hole,” Warner said.
The CARES Act, passed by Congress on March 27, provided $150 billion in aid for state and local governments. Of that, $3.3 billion went to Virginia. The state government will ultimately decide how much of that money will be sent to local governments.
Prince William Board of Supervisors Chair Ann Wheeler, who was on the call, said Prince William County has incurred about $5 million in COVID 19-related expenses that the county is hoping to be reimbursed for. Some of the largest expenses have been PPE and money given to local nonprofit partners, said Wheeler, D-At Large.
Wheeler said the federal aid will likely be coming to the county from the state sometime in the next two weeks.
At a budget hearing last month, county officials outlined $28 million in projected revenue losses as a result of the crisis. That included less projected revenue from local taxes such as the sales tax, transient occupancy tax and the county's Business Professional and Occupational License tax.
That resulted in a smaller county budget for fiscal year in 2021 than what they county had originally proposed before the pandemic. But the county budget is still larger overall than the prior year.
David Sinclair, the county’s Office of Management & Budget director, said in an email that, as of April 17, the county had spent $3.78 million on COVID-19 efforts. Sinclair said that guidance provided by the US Treasury related to the Coronavirus Relief Fund, “specifically prohibits recovery of lost revenues.”
“However, the County does intend to seek reimbursement for all allowable costs incurred related to COVID-19,” Sinclair said.
Warner said the U.S. Senate is working towards creating a new federal aid package that will include additional funding for state and local governments. But it’s unclear whether that aid will allow for the recovery of lost revenues that have occurred as a result of the pandemic.
“That's one of the things that we're trying to work through in that next COVID package, as well as additional funding,” Warner said.
Sen. Majority Leader Mitch McConnell, R-Kentucky, has indicated that there will be another round of relief funding that will address the needs of state and local governments. In an interview with Fox News Radio, McConnell discussed the funding, saying: “…we need to make sure that we achieve something that will go beyond simply sending out money."
"We do want to help them with expenses that are directly related to the coronavirus outbreak but we're not interested in helping them fix age-old problems that they haven't had the courage to fix in the past," McConnell said.
Warner is running for re-election to the U.S. Senate in 2020. His Republican opponent will be decided in Virginia’s June 23 primary. There are three candidates vying for the GOP nomination.
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