Pa. should use up its $1B reserve before asking Congress for more COVID cash, Republicans say

Pennsylvania Gov. Tom Wolf wants Congress to help the state balance its budget this year, in the middle of a pandemic and a recession. But the state’s Republican congressmen say the Democratic governor and other state leaders ought to spend the money the federal government sent to Pennsylvania earlier this year before they ask for more.

The Keystone State disagreement reflects a larger ongoing dispute between congressional Democrats and Republicans about whether states should receive hundreds of billions more in federal aid as they struggle with health and economic crises. That’s a main point of disagreement in the stalemate in Washington over additional federal coronavirus relief.

“I’m not ruling out the need for more assistance, but the fact is there’s a lot of money that the governor of the state of Pennsylvania is sitting on,” said Rep. Glenn Thompson, a Republican from northwestern Pennsylvania.

“I’d like to see that utilized for the purpose I voted for, which is to help the state and county governments… If there are urgent needs — and I believe there are in Pennsylvania — they should be utilizing that money now, not sitting on it.”

Pennsylvania state lawmakers in May approved a five-month budget, rather than their normal year-long spending plan, because of uncertainty surrounding the pandemic. (The legislators did, however, provide funding for schools and a handful of other programs for the entire year.)

As part of the deal, lawmakers kept $1 billion in federal coronavirus relief money in reserve, until they found out whether Congress would offer any more aid and, if so, how the new money could be spent.

“I don’t know what they’re holding it for. They should spend it so Pennsylvania’s economy recovers,” said U.S. Rep. Dan Meuser, a Republican who served as the state secretary of revenue under a prior administration before joining Congress. “The best way of increasing [state] revenues is by having people go back to work.”

U.S. Rep. Fred Keller said in a statement that Pennsylvania’s decision to hold onto existing federal relief funds made it harder for Congress to gauge whether more money would be needed.

“Before Congress spends trillions more of taxpayers’ dollars, states must first drive out the already appropriated federal dollars so that we can get a clear picture of how much, if any, additional federal funding is needed,” Keller, a Republican, said.

House Democrats included nearly $1 trillion for aid to states, localities and tribes in the $3 trillion relief package they passed this spring. Most Republicans who control the U.S. Senate have resisted spending more money to assist state and local governments, though GOP Sen. Bill Cassidy of Louisiana has pushed unsuccessfully for $500 billion in aid.

Senate Majority Leader Mitch McConnell (R-Ky.) did not include any direct aid for states and municipalities in a relief proposal he introduced last month and called the House funding “a trillion-dollar slush fund for states.”

Negotiations over the next relief package have stalled, though. The parties have clashed over how much in supplemental unemployment benefits to provide to out-of-work Americans, whether to shore up the Postal Service’s finances and what legal protections to provide for businesses potentially facing Covid-19 related claims.

Pennsylvania’s Republican members of Congress have, however, pushed for states and localities to have more flexibility in how they spent the existing coronavirus relief money from the CARES Act, which Congress passed in March. That law specified that state and local governments had to spend the money on Covid-19 related expenses, which means they could not use the money simply to replace the drop in tax revenue that came with the recession.

Thompson said he proposed legislation, along with U.S. Rep. Madeleine Dean, a Pennsylvania Democrat, that would give counties an extra year— until the end of 2021, rather than the end of 2020 —to spend the federal coronavirus relief money they had received.

“A number of counties have recognized that their No. 1 need is increased connectivity, high-speed digital connections and broadband,” Thompson said. “It’s almost impossible to invest money [in that] and have something completed by Dec. 31.”

Meuser, the former revenue director, said he would be willing to support an infrastructure package to help reinvigorate the economy, which would, in turn, help state revenues.

He said state and local governments could take advantage of low interest rates for borrowing right now, partner with private companies and build projects that expand the use of technology. But Meuser said the infrastructure bill House Democrats passed last month was “filled with a lot of waste,” particularly clean technology projects and other spending on initiatives that were originally part of the Green New Deal.

Both Meuser and Thompson said they were frustrated not just with the Democrats who run the U.S. House, but with Pennsylvania’s Democratic governor.

“I’m worried about the governor’s continued stance on our economy. We’ve learned a lot since March 16th, but we’re not practicing what we’ve learned,” said Meuser. He said businesses should be allowed to reopen as long as they can provide a safe and healthy environment, and that he’s been trying to get Wolf to permit that for months.

“This pandemic is not going away. So we have two choices: We can stay confined, run up huge debts and talk bailouts. Or we can follow health and safety procedures and be 75 percent, 80 percent or 90 percent open,” Meuser said.

Thompson said Congress has shown it can act quickly for pressing needs, so there’s no reason for Wolf and state lawmakers to hold back relief money.

“We have deployed trillions of dollars in a matter of months here. It proved we can respond promptly,” Thompson said. “So, no, I don’t think that the governor should be holding back, playing some sort of gambling game with this money, where he wants to leverage it to maybe get more money in the future.”

“Use the money that’s there, show us how it’s invested, show us the outcomes and help us measure what the remaining needs are, so we can accurately, effectively and promptly respond to them,” Thompson added.

In a statement, Lyndsay Kensinger, press secretary to Wolf, said that the restrictions placed on federal relief money barred state and local governments from using the money for revenue losses related to Covid-19.  “It’s critical that the federal government pass additional stimulus funding to help the commonwealth avoid cuts and to provide economic relief,” Kensinger said, noting that the commonwealth is projecting a $5 billion deficit.

“Pennsylvania’s citizens need the White House and Congress to prioritize the needs of Pennsylvanians over Washington politics and work to pass a stimulus bill that funds desperately needed programs, as well as helping the state, counties, and municipalities fill budget holes causes by this crisis,” Kensinger added.

The U.S. Treasury Department released a report in July that showed that state and local governments had only spent about a quarter of the money they were given from the CARES Act. It showed that Pennsylvania’s state government and its biggest localities had only spent 26 percent of the $4.9 billion they had been allocated.

But the National Governors Association and other organizations representing state and local leaders said the Treasury Department “incompletely and, at times inaccurately, reported on” the status of the spending. They also pointed out that it took the Treasury Department several months to issue rules for how states could spend the relief money, and that the Treasury report only covered spending through the end of June.

“As Congress continues to consider the federal stimulus package, state and local organizations reiterate that additional aid is necessary not only to maintain health care, unemployment and emergency services that their members are providing during the pandemic, but also to offset steep losses in state and local revenue due to the economic contraction shown in the GDP numbers,” the state and local groups wrote in a statement.

“Without major new federal assistance for all states, counties and cities, this will result in the loss of critical services and hinder an economic recovery,” they added.