WASHINGTON, DC – U.S. Senator Jack Reed (D-RI), who led efforts to create the $150 billion Coronavirus Relief Fund in the Coronavirus Aid, Relief, and Economic Security (CARES) Act (Public Law No. 116-136) unveiled new legislation to ensure states, cities, and towns have the funding and flexibility they need to save lives and help communities survive the novel coronavirus (COVID-19) pandemic.

The $150 billion Coronavirus Relief Fund (CRF) was created under the CARES Act to provide states and local governments with emergency resources to help with unexpected expenditures incurred directly as a result of COVID-19.  The funds may only be used to cover costs incurred between March 1 and December 30, 2020.

The State & Local Emergency Stabilization Fund Act (S. 3671) would cut needless red tape that was bureaucratically imposed by the Trump Administration to try to constrain states from spending the CRF money that Congress unanimously approved to save lives and help rescue our economy.  The legislation makes it clear that lost revenue is a cost.  It also extends the time horizon states have to spend the money in order to ensure they have the flexibility to equitably allocate and disburse the funding and help communities combat COVID-19 and recover.

The bill would also provide an additional $600 billion in funding for state and local governments nationwide.

“Different states are in varying stages of their battle with COVID-19, but this is truly a national problem and all fifty states are grappling with a loss in revenue, added expenses, and skyrocketing unemployment,” said Senator Reed.  “President Trump is feuding with governors and trying to bind them with bureaucratic red tape that wasn’t part of the law.  This legislation cuts through that.  It will ensure all states regardless of whether they are red, blue, or purple have the flexibility to use already appropriated federal funds and the additional federal funds in this bill in areas where they are most needed.  The law already includes mechanisms to both trust and verify that states on the frontlines of this crisis are doing the right thing so our country is in the best position to contribute to a robust economic recovery.  Instead of hindering the ability of states to combat COVID-19 and recover, the Trump Administration should do its part to help.” 

After the U.S. Treasury issued its initial Coronavirus Relief Fund guidance for State, Territorial, Local, and Tribal Governments with limiting language not found in the law, Reed led forty-six U.S. Senators in calling on the Trump Administration to reverse course and revise the overly restrictive guidance.  In a letter to Secretary Mnuchin, the Senators urged the Trump Administration: “to follow the law as written instead of creating more bureaucratic red tape in the middle of a public health emergency and ensuing economic crisis.  Of all the regulations that this Administration seeks to cut, it should start with this one.”

State and local governments are being pushed to the financial brink by skyrocketing costs and plunging revenue, and they need stability in order to have a chance at recovery.  Senate Democrats resoundingly reject Senate Republican Majority Leader McConnell’s (R-KY) suggestion that states go into bankruptcy as a preferable alternative to additional flexible federal assistance. 

The letter went on to note that the new limits the Trump Administration is seeking to impose on states is counterproductive and creates needless obstacles:  “In the midst of an economic collapse, the intent of the entire CARES Act is to provide flexible help to a wide range of Americans.  To prevent the flexible use of these relief funds is a choice that is neither required nor intended by law,” the Senators wrote.

Reed’s new bill would help ensure states, Tribes, and localities may use these funds to maintain services for all Americans as the CARES Act clearly permits.

While some Republicans have tried to paint this issue as a ‘red state vs. blue state’ problem, Senator Reed notes all fifty states are suffering and need financial relief from the federal government to prevent massive layoffs, cuts to needed services, and future tax hikes.

According to an analysis by Slate, five of the top seven states facing the biggest COVID-19 revenue shortfalls are so-called ‘red states,’ including: including Louisiana (with a -34.2% drop), followed by New Jersey (-26.2%); New York (-25.8); Missouri (-21.3%); Florida (-19.5%); Kansas (-19.1%); and Kentucky (-16.5%).

“Nobody is immune from this crisis.  It’s great to hear some of my Republican colleagues urge flexibility for the funds currently available, but that’s not going to fill the widening budget black hole facing Governors and Mayors around the country.  They’ll need more cash than we’ve provided so far.  President Trump’s lazy, laissez-faire approach to this pandemic is leading the country toward mass layoffs, education cuts, and huge tax increases.  We can’t let that happen.  I urge Republicans to work with us to help protect the people they represent.  Failure to respond in a timely manner will only result in more layoffs and a longer recession.  It will mean states and local governments will be left unable to provide needed health, education, public safety, and sanitation services, just when those services are needed most.  Any economic recovery needs reliable state and local governments that provide the business certainty that make our country attractive to businesses and investors throughout the world,” said Reed.  “Congress should come together, do the right thing, and provide states the resources they need to save lives and livelihoods and get the economy working again.”

Senator Reed initially called for a $750 billion state stabilization fund, while Senate Republicans called for zero and tried to block the inclusion of these state funds.  But Senator Reed enlisted the help of Republican state leaders who also sounded the alarm, and Congressional Republicans agreed this was a smart, cost-effective investment in staving off a deeper and longer economic catastrophe.  Ultimately, negotiators agreed to include $150 billion for the program in the CARES Act, with a state minimum of $1.25 billion at Senator Reed’s insistence.

Reed also noted that state and local aid alone will not be enough.  Senator Reed concluded by saying: “Congress must be prepared to provide sustained federal support to save lives now and secure our recovery over the long-term.  We need to enact legislation and make investments addressing pressing needs caused by the pandemic.  I will continue pushing for key initiatives like enhanced unemployment, school and transportation infrastructure, and housing assistance to prevent needless foreclosures and evictions, as well as funding for other worthy programs.”