What the Revival of ‘Build Back Better’ Could Mean for State and Local Funding

Optimism is growing that Senate Democrats could try again to pass President Biden’s Build Back Better plan. While environmental advocates expect the previous $1.75 trillion proposal to be significantly scaled back, hundreds of billions of dollars in climate funding could still be headed to states and local governments.

“The chatter on the Hill is very hopeful. The bill could be very significant and game-changing for climate and communities,” John Reuter, the League of Conservation Voters’ vice president for state and local strategies, told Route Fifty in an interview. 

Since the House version of the plan was blocked in the Senate by moderate West Virginia Democratic Sen. Joe Manchin last year, he and Senate Majority Leader Chuck Schumer of New York have been negotiating behind the scenes on a new, smaller proposal. 

On Wednesday, Schumer sent an agreement the two have reached on an aspect of a broader deal, a proposal to lower drug prices, to the Senate’s parliamentarian. 

That procedural move, to see if the drug pricing deal complies with Senate rules that would allow it to be passed without any Republican votes, has raised hopes that Schumer and Manchin are close to agreement on other aspects of a deal, including the climate provisions. 

If so, Democrats could try to pass the overall package under a partisan budget procedure called reconciliation before Congress leaves for its August recess.

The funding would be a boon for states, particularly as even some headed by Republican governors try to combat climate change. 

Last November, a bipartisan group of 24 governors, called the U.S. Climate Alliance, committed to trying to reach a number of ambitious goals, including reducing greenhouse gas emissions by half in their states by 2030 and achieving net-zero emissions no later than 2050.

It’s unknown how much of the proposal passed by the House last November will survive the Senate negotiations. That bill included $555 billion in climate funding, a plan the Biden administration touted as “the largest effort to combat the climate crisis in American history.” 

Among other things, the House bill called for creating $250 million in grants to help states, local governments and tribes develop plans to reduce greenhouse gas air pollution, and an additional $4.75 billion to actually implement those plans.

“We’re sort of on pins and needles right now,” Reuter said of the wait to see what emerges from the closed-door negotiations.
 
Carolyn Berndt, the National League of Cities’ legislative director for sustainability, also said in an interview the proposal could be a “significant complement” to the climate-related funding in the bipartisan infrastructure law Biden signed last year. 

Should it be similar to the House bill, a new proposal could fund an array of grants aimed at areas like retrofitting buildings, reducing greenhouse gas emissions, increasing electric vehicle purchases, removing lead pipes, and helping communities deal with air pollution from wildfires—all with an emphasis on helping disadvantaged communities.

Will Workforce Training be Included?

Schumer and Manchin’s negotiations, however, are not expected to include a number of provisions important to Democratic governors including funding to reduce childcare costs, increased spending on low-income housing, or extending subsidized Affordable Care Act health insurance to people in states that have refused to expand Medicaid.

Berndt also said it’s unknown whether Manchin will agree to include funding for workforce development in the deal, which is another priority for cities.

Manchin’s support is key. Republicans are expected to unanimously oppose any proposal like the one Democrats are backing, believing that spending more federal dollars on top of the American Rescue Plan Act and the Infrastructure Investment and Jobs Act will worsen already spiraling inflation.

In order to pass any deal, Democrats, as they tried last year, would rely on a budget procedure that would allow them to bypass the usual requirement for 10 Republican votes to approve a measure in the Senate, and instead approve the proposal with a simple strictly-partisan majority. 

All Senate Democrats would need to go along, though. Last year, Manchin blocked an attempt to approve the domestic spending package saying the House bill was too expensive.

Since then, he expressed support for a smaller deal that would include climate funding, the proposal to lower drug prices, as well as tax cuts. He hasn’t mentioned workforce development, though. His spokeswoman did not return an email asking if he supports such spending.

The House’s version included $40 billion for higher education and workforce development programs, which according to a National League of Cities analysis, would have increased the Labor Department’s annual spending on workforce development by 50% over five years.

Berndt said the funding is important to cities, especially as they face worker shortages in building infrastructure projects. 

A separate National League of Cities report found that three in 10 infrastructure jobs are hard to fill. Without “significant funding for workforce development in the ongoing budget reconciliation process,” the report said, “the labor market will be challenged to absorb the immense anticipated demand resulting from the Infrastructure Investment and Jobs Act.”

Climate Spending Would Boost State Efforts

On the climate side, Reuter said that while it’s unknown how much funding will be proposed, he expects any deal between Schumer and Manchin to include giving states and localities some discretion in deciding how to spend the money to combat climate change.

States are clamoring for more funding on this front. In June, the U.S. Climate Alliance governors wrote congressional leaders, urging them to approve ​​a “similar level of funding” for climate as was proposed in the House’s “transformative” Build Back Better bill. 

“We are doing our part by innovating and accelerating climate solutions. We are getting more zero-emission vehicles on our roads, rapidly transitioning to clean energy, improving energy efficiency, supporting overburdened communities and displaced workers, cutting harmful emissions, and strengthening resilience,” the governors wrote. 

“But this is not enough to reach our country’s climate goals. We need major investment from Congress commensurate with the crisis we all face and the rapid transition we must all make.” 

The funding would also come as cities and counties have been active trying to address climate change. 

Philadelphia, for instance, is shifting from gas-powered light- and medium-duty vehicles like sedans, SUVs and pick-up trucks to those that run on electricity to reduce emissions from those vehicles by nearly 50% by the end of the decade. 

A spokeswoman for the city of Philadelphia told Route Fifty the local government would be “excited” to get federal funding to explore a number of other initiatives, such as home energy and efficiency tax credits, a home electrification rebate program, electrifying its port, expanding support for clean transit vehicles and creating a Civilian Climate Corps.

The National League of Cities in April issued a report looking at 50 local government climate action, sustainability and resilience plans. It shows these plans are focused on areas like making buildings more energy efficient, adding electric vehicles to fleets, cutting down on garbage going to landfills and increasing public transit service.

The House’s bill also had the support of the National Association of Counties, which said in a statement last year that the “reconciliation package would result in significant county wins and impact county systems and the lives of county residents.” 

In addition to the funding in the House bill that would go to states and localities, Reuter said even more significant could be the hundreds of billions of tax credits in the House bill for businesses and individuals. The credits would go toward converting power plants to cleaner energy, reducing electric vehicle costs for consumers, and incentivizing homeowners to upgrade major appliances and electrical panels.

Though that money would not go to the states, it would build on their efforts, he said. 

“It lets the states do more,” Reuter said. 

In Illinois, for example, a new $4,000 electric vehicle tax credit went into effect on July 1 but will drop to $1,500 after 2028. A federal credit, like the $12,500 one under discussion as part of last year’s Build Back Better talks, would lower the purchase price of the vehicles even further.

The House bill also contained $7 billion in Environmental Protection Agency competitive grants aimed at reducing greenhouse gas emissions in low-income and disadvantaged communities.

According to a NACo analysis, the bill included billions of dollars in additional grants focused on reducing air pollution, dealing with hazardous waste, getting lead out of water at schools and expanding urban parks. How many of these programs could make the final cut in the version of the legislation that is now under discussion remains unclear.