This Time, Lawmakers Want Control Over Covid-19 Aid

This story was originally posted by Stateline, an initiative of the Pew Charitable Trusts.

With states set to receive billions of dollars in federal aid, lawmakers and governors are sparring over who should decide how to spend the cash.

Look no further than Kentucky, where Democratic Gov. Andy Beshear chose how to spend $1.5 billion in federal coronavirus aid last spring. Now another $2.4 billion is on the way, and Republican lawmakers have blocked Beshear from divvying up the latest windfall without their permission.

“Our constitution in Kentucky only vests spending authority with the General Assembly,” said Kentucky state Sen. Chris McDaniel, a Republican and co-chair of the budget committee. McDaniel said the legislature’s proposed budget will clarify that authority.

Bills in at least three other states—Connecticut, West Virginia and Wisconsin—also would let lawmakers control the aid states receive from the American Rescue Plan Act, which President Joe Biden signed earlier this month. The law gives states and the District of Columbia $195 billion to spend on broadly defined purposes, such as fighting the pandemic and boosting the economy.

The federal aid fight is part of a larger struggle over the balance of power in state governments that’s emerged during the COVID-19 pandemic. A growing number of lawmakers say it’s time to reconsider how long governors can act without consulting them during a crisis and to limit executive branch control over federal grants. And Republican state lawmakers might want the chance to receive credit for the spending, especially since no GOP member of Congress supported the relief package.

Some governors say tussles over spending decisions could hold up COVID-19 relief for people, businesses and communities in need.

Beshear on Friday vetoed the budget provision giving the legislature authority over American Rescue Plan Act funds, claiming that it would conflict with federal law and delay spending decisions.

“These provisions also slow and hinder the provision of assistance to the many Kentuckians that are unemployed or underemployed, to affected Kentucky businesses and nonprofit organizations,” Beshear wrote in his veto message.

The Kentucky legislature overrode the veto.

Wisconsin Gov. Tony Evers, also a Democrat, on Monday vetoed a bill that would have given the Republican-controlled state legislature power over the money. He said during a news conference that he wanted to make sure the funds didn’t “get tied up in some political fight in the legislature.”

But Connecticut’s Democratic governor, Ned Lamont, hasn’t said whether he’ll try to block a bill—unanimously approved by the Democratic-led legislature—that would require him to get lawmakers’ approval before spending the money.

“This legislation is consistent with Governor Lamont’s approach since the beginning of the pandemic, which has been to work with the legislative branch throughout the pandemic emergency on critical decisions,” said Paul Mounds, Lamont’s chief of staff, in an emailed statement.

The West Virginia bill passed unanimously through the Republican-controlled House of Delegates last month and is now being considered by the state Senate. Republican Gov. Jim Justice’s office did not respond to Stateline’s request for comment before publication time.

Whether legislators have a say in how American Rescue Plan Act dollars are spent depends on state law. Governors and state agencies in 31 states can spend unanticipated funds, such as federal emergency grants and court settlements, without legislative approval, according to the National Association of State Budget Officers, a professional association based in Washington, D.C. 

Restrictions on that power vary. In Pennsylvania, for instance, the governor can unilaterally spend federal aid only during an emergency. In Minnesota, the governor can do so when the legislature isn’t in session, but must consult with lawmakers when they are in session. 

Connecticut lawmakers didn’t object to Lamont’s control over federal relief last spring, when it wasn’t clear how long the pandemic would last or how bad things would get, said Democratic state Sen. Cathy Osten, co-chair of the Appropriations Committee.

“I think people were probably not as willing to have this conversation,” she said, “just because of where we were with dealing with our constituents relative to COVID.”

But a year later, with $2.6 billion in new federal aid heading Connecticut’s way, lawmakers decided it was time they had oversight of the funds. The aid is equal to about 10% of the 2021 state budget.

Backing the bill was a no-brainer for Connecticut’s Republican lawmakers, who have had little say over the state’s pandemic response. “We want to be able to do our jobs,” said GOP state Rep. Nicole Klarides-Ditria. “We were elected to make these decisions.”

Lawmakers in some states can work the new federal aid into their budget plans as part of the regular appropriations process. But there’s little time to do so in about half of states, where legislatures head home for the year by mid-May.

Kentucky’s legislative session ended Tuesday, so lawmakers didn’t have time to include plans for the American Rescue Plan Act aid in their budget, McDaniel said. The legislature was reportedly planning to pass legislation Tuesday that could allocate some of the money. But Beshear will likely have to call lawmakers back for a special session to spend the rest of the aid.

Democratic lawmakers in the state also want a say in how the money is spent. Kentucky Senate Minority Leader Morgan McGarvey, a Democrat who also serves on the budget committee, said he supports giving the legislature a bigger role, although he disagrees with the budget language.

“We should all just be communicating on the best and most efficient way to help Kentuckians with the money from the American Rescue Plan,” McGarvey said. “I don’t view this as a turf war, but I do believe, as a legislator, that the legislature plays a role in appropriating the money that comes to the state.”

Meanwhile, it could take weeks or months for the U.S. Treasury to clarify the rules for spending the federal aid. Some state leaders are reluctant to start budgeting the aid before then. In particular, they want Treasury officials to explain one specific sentence in the law, which bans states from using the aid to pay for tax cuts.

Treasury Secretary Janet Yellen said during a U.S. Senate hearing last week that explaining that provision will be difficult. “We will have to define what it means to use money from this act as an offset for tax cuts,” she said. “And given the fungibility of money, it's a hard question to answer.”

In Kentucky, Democrats and Republicans both want to use part of the federal aid to expand broadband internet and shore up the unemployment insurance trust fund, McDaniel and McGarvey said.

But there inevitably will be partisan fights over how to spend the cash, said Sam Marcosson, a professor at the University of Louisville Louis D. Brandeis School of Law. “I think tax cuts are very likely to also be in the mix,” he said, depending on what the Treasury allows.

Lawmakers have plenty of political reasons to push for control over the relief, experts who follow state politics say.

They could use the money to benefit their districts, said Professor Gary Rose, chair of the department of government at Sacred Heart University in Fairfield, Connecticut. “A lot of that money that’s coming in, here and elsewhere, has political ramifications,” he said.

If Kentucky’s Republican lawmakers don’t insert themselves into the spending process, their party can’t claim any credit for the aid, Marcosson said, as no congressional Republicans voted for the aid package.

“The fear would be, politically, that it puts them in a position where the Democrats can claim all the credit if it does work,” he said of the aid package, “and the economy rebounds in the second half of the year.”