Local Governments Still Counting on Pandemic Aid Despite Clawback Threat

As House Republicans push to reduce federal spending under the Biden administration, local leaders have been worried that budget negotiations to raise the nation’s debt ceiling could mean Congress would claw back some American Rescue Plan Act funds.

So far, Republicans have not released a detailed budget proposal, but ARPA projects may be spared.  

A House aide in an email to Route Fifty denied that Republican leaders on the budget committee are considering taking back funds that have already been given to local governments, even if officials have yet to decide how to spend it. 

What’s under consideration, the aide said, is to recall funds for other parts of the $1.9 trillion rescue package that’s still in the possession of the Treasury Department. 

“We aren’t proposing clawing back what has already been given to counties that they may or may not have sent out the door yet. It’s the money that is still sitting at Treasury that hasn’t been doled out yet,” the aide said.

Whether other influential committees that will be involved in crafting a spending plan feel the same way remains an open question, as does whether Republicans can get their slim majority to agree. Spokespeople for those committees, including the appropriations committee, did not respond to inquiries. 

The prospect of Congress reclaiming part of ARPA’s $350 billion in Coronavirus State and Local Fiscal Recovery Funds has unsurprisingly raised the concerns of local officials. Detroit Democratic Mayor Mike Duggan, for instance, urged other mayors at a meeting of the U.S. Conference of Mayors last month to quickly spend the money before it could be taken away. 

Local officials, including some from Republican areas of the country, said in interviews they opposed the idea. “I think that'd be a really bad idea,” Jason Bellows, the Republican supervisor of Lancaster County, Virginia, and president of the Virginia Association of Counties, said in an interview last weekend. 

“We're best suited to spend those dollars wisely and make the most proper investments in our communities because we know our community's best,” he said at a gathering of the National Association of Counties in Washington. 

Although President Joe Biden has said he will declare an end to the national Covid-19 public health emergency in May, Bellows said his county still needs all of the money it is slated to get so officials can deal with issues like job training and helping children close learning gaps caused by the pandemic. 

Tim Ivey, the Republican chairman of North Carolina’s Scotland County Board of Commissioners, said his county still hasn’t decided how to spend its ARPA dollars. He told Route Fifty the county is holding about 30% of its aid “in order to wait to see what was going to happen” with the pandemic, but officials are counting on receiving all it was supposed to get to deal with issues like rising housing prices. 

“If they put a clawback in, it's gonna catch us off guard,” he said. 

Some governors also oppose the idea of recalling funds meant for state and local governments. New Jersey Democratic Gov. Phil Murphy, co-chairman of the National Governors Association, said he raised the issue with White House officials at a meeting last week. “It would wreak havoc with our respective state budgets,” he said. 

Murphy’s co-chair, Utah Republican Gov. Spencer Cox, agreed. Cox said he has “some amount of optimism that reasonable cooler heads will prevail here and that there will be a constructive solution” to the ongoing drama over raising the debt ceiling.

Since passing ARPA, some influential Republicans have questioned the Treasury Department’s oversight and scrutinized how some localities are using the money, such as New Jersey spending some of its pandemic aid to attract the World Cup.

“There’s still a lot of Covid money that still hasn’t been spent out there,” Kentucky Rep. James Comer, the Republican chairman of the House Committee on Oversight and Accountability, said during an appearance last month at the National Press Club. “And that’s going to play a role as we talk about the debt ceiling negotiations.”

According to a Brookings Institute tracker, the nation’s 329 largest local governments in the country had budgeted 67.8% of the $44 billion of their ARPA funding they’re due to receive. The site was updated on Tuesday and includes data through September.

However, Glencora Haskins, senior research analyst at Brookings Metro who has been working with the National League of Cities to track the money, virtually all of the ARPA money has already been sent to states and localities. 

Given the uncertainties over what could emerge from Congressional budget talks, National Association of Counties CEO and Executive Director Matthew Chase said the organization was “not as concerned about federal clawbacks.” But Chase said during a conversation between NaCo leaders and Route Fifty reporters on Friday that he is troubled that members of Congress have questioned how local governments have used the money. 

“What we're worried about is the erosion of trust between federal, state and local officials, that attacks the idea that county officials are trusted stewards of public dollars in the crisis,” he said.

Counties must still deal with the aftereffects of the pandemic and still need the funding, said the association’s immediate past president, Larry Johnson, a Democratic commissioner in DeKalb County, Georgia. 

“You've seen it with mental health. You've seen the food insecurities. You're seeing that evictions are going back up. I'm seeing more for rent signs than I've ever seen,” he said.

To NaCo President Denise Winfrey, a Will County commissioner in Illinois, the Covid aid is bringing to counties the funding they needed from before the pandemic. 

“It is not really extra money in the way that some people on the Hill might think it is. It is money that we should have had all along,” she said. “Before that money, we weren't able to give the breadth of services or the depth of services that we needed to and there was a constant demand And lately, the demand has risen.”