Washington at a standstill, as states face the loss of federal help amid ‘the worst part of the crisis’

States are running out of CARES Act money as COVID-19's toll and costs continue to mount. (Photo by Scalinger/iStock Getty Images)

WASHINGTON — The number of coronavirus infections across the country is swelling at a perilous time for state governments, just weeks before federal support rushed through Congress in the pandemic’s early stages is set to end.

The expiring provisions from the $2 trillion CARES Act and subsequent executive orders will mean reductions in unemployment benefits for those struggling to find work, the loss of eviction protections, and a restart to monthly student loan bills that had been suspended.

Those changes heading into the darkest months of winter will not only hit hard at vulnerable Americans. They’ll increase the fiscal strain on state governments, which are facing a deadline to spend any remaining federal dollars received for pandemic-related costs — or send that money back to Washington. And the critical moment is coming at a time when a new president has been elected, the current president is refusing to concede and Congress is unable to muster the consensus to take action.

“It really is becoming a problem, in that I think the people in the White House are focused on fighting elections and the people in the Biden administration don’t have any information and haven’t taken over, and there’s a little bit of a vacuum right now,” Maryland Gov. Larry Hogan, a Republican, said during a recent news conference.

Hogan added that he still just sees “bickering” from those in Congress: “The states are out here fighting probably the worst part of the crisis we’ve ever had to deal with, and we don’t really know what’s going on at the federal level.”

Despite calls for a new infusion of federal relief, any additional COVID-19 aid appears unlikely until President-elect Joe Biden takes office. Top congressional leaders and the Trump administration held on-again, off-again negotiations over a new coronavirus relief package before the November election, but those talks have not resumed since Election Day.

Lawmakers are now on recess for the Thanksgiving holidays. They will return for the lame-duck session — the period between an election and when the newly elected lawmakers take office — to consider government funding legislation needed to avert a shutdown after Dec. 11.

That has left states on their own to deal with the looming consequences as COVID-19 infections nationally exceed 11 million and more than 250,000 deaths in the U.S.

Cumulatively, state, local, territorial and tribal governments are projected to face a budget shortfall between $275 billion and $415 billion, according to the Center on Budget and Policy Priorities, and that’s if elected officials drain any remaining fiscal reserves.

Already, states and localities have furloughed or laid off 1.2 million workers to date, based on CBPP data.

In a recent letter to congressional leaders urging more financial help to states, Minnesota Gov. Tim Walz wrote that in February, his state was projecting a budget surplus of $1.5 billion. That expected surplus quickly crumbled to a $2.3 billion projected deficit for the fiscal year ending in June. Now there’s a yawning $4.7 billion shortfall anticipated for the following two-year budget.

The CARES Act approved last spring included a $150 billion relief fund for state and local governments. Those dollars came with specific requirements on how they must be spent, and a deadline of spending the money by Dec. 30 even though “we know the virus is not going away by the end of the year,” Walz wrote.

“To the contrary, at the rate of increase we are seeing in the current surge, it is going to get much worse before it gets better,” he wrote. “And yet states will be left with no additional federal resources to combat the rising tide of infections, unemployment, and human services needs that will continue long after the funds from the CARES Act expire.”

Minnesota has nearly exhausted those dollars, as have most states across the country. Iowa was awarded about $4.61 billion in CARES Act funds. State agencies have spent about 72.6% of the money, totaling $3.35 billion, according to the Iowa Department of Management.

Among 42 states and territories surveyed by the National Governors Association last month, 89% of the federal coronavirus relief dollars had been allocated. The NGA had unsuccessfully urged this summer for another round of relief to states of $500 billion.

A $3 trillion relief package approved by the U.S. House of Representatives in May would have provided state and local governments with more than $1 trillion in aid, and more flexibility in how those dollars could be used. That relief to state and local governments was one of several sticking points during the protracted negotiations this fall between House Speaker Nancy Pelosi, D-Calif., and Treasury Secretary Steve Mnuchin.

In the Senate, top leaders have pointed fingers at each other in explaining the lack of action: Majority Leader Mitch McConnell, R-Ky., has criticized Democrats for blocking coronavirus relief bills on the floor, and Minority Leader Chuck Schumer, D-N.Y., has decried those GOP measures as inadequate for addressing the growing crisis.

Even a measure co-sponsored by Sen. Chuck Grassley, R-Iowa, to extend the time frame when states could use any remaining federal relief dollars, has failed to gain traction.

In addition to the expiring state aid, these federal provisions also will end:

  • Unemployment benefits: The CARES Act had provided an additional 13 weeks of unemployment insurance and expanded who is eligible for unemployment benefits through December.
  • Eviction protection: The Centers for Disease Control and Prevention had issued a moratorium on evictions for most tenants nationally through Dec. 31.
  • Student loans: Federal student loan payments were deferred through September, and President Donald Trump had extended that relief through December.

Biden sought to offer reassurance to governors this week, saying after a video conference call with Hogan and other governors that his administration will seek to deliver economic relief to state and local governments “soon rather than later, and with flexibility for the states to meet their needs.”

But Biden won’t be sworn in for two more months.

In the meantime, state lawmakers in Pennsylvania must pass a budget for the remainder of the fiscal year that ends in June, after deciding this spring to approve only a months-long spending plan instead of a year-long budget, due to difficulties in projecting how dramatically the pandemic would affect state finances.

Pennsylvania has $1.3 billion left in unspent CARES Act funds, and the budget proposal that cleared a state House committee would use those dollars to backfill salaries of state law enforcement, corrections officers, and Department of Health employees, according to the Pennsylvania Capital-Star.

States also have been preparing plans for distributing the COVID-19 vaccines racing through the federal approval process, potentially becoming ready to be administered before the end of the year.

The CARES Act included $200 million to help with those costs, a small fraction of the more than $8 billion that public health officials estimate will be needed.

With help from Washington lacking, states are attempting their own solutions. Wisconsin Gov. Tony Evers has put forward his own coronavirus relief bill relying on state funds, though legislative Republicans so far have not embraced his proposal, the Wisconsin Examiner reported.

Evers has said he hopes to see another round of federal relief to states, and that if money does come through, it could be used instead of the state money that he has proposed.

Responding to criticism about the measure’s price tag, Evers told the Examiner: “It’s pretty simple. We chose state money because the federal money ends, and we have expended all of the money that we did receive from the federal government on contact tracing and testing and making sure that we provide resources for farmers and small businesses across the state, and other areas that are struggling mightily economically.”