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Small local governments that received little or no direct aid from previous Covid-relief packages will fare much better in the new legislation that Congress passed Wednesday.
The American Rescue Plan will provide funds to each of the nation’s 3,143 county-level governments, plus more than 26,000 municipalities.
In 2020, the CARES Act provided direct aid only to cities of 500,000 residents or more, although states allocated some funding to additional local governments.
“Under the American Rescue Plan over 30,000 local governments will get aid,” Lucy Dadayan, senior research assistant at the Tax Policy Center, told the Daily Yonder in an email. “Under the CARES Act, only about 155 local governments got funding (those with over 500,000 population).”
More than $65 billion will be distributed among county governments, according to data from the House Oversight Committee. Rural county governments will receive a total of $8.9 billion, while the bill allocates $54.7 billion to metropolitan counties. The county funding formula comes to about $200 per capita.
Cities with populations of 50,000 or greater will receive $45.6 billion dollars, while municipalities with smaller populations will receive a total of $19.5 billion.
The new legislation will require state governments to allocate support to smaller local governments using a federally mandated formula, said Zoe Willingham, a rural-focused research associate at the Center for American Progress.
Although the results could be uneven, the change could mean broader distribution of the funds, which are intended to assist local governments facing revenue shortfalls and additional expenses because of the pandemic.
“If I’m right,” said Willingham, “it means that this apportionment of funds is probably more equitable than how some states disburse funds but less equitable than others.”
In total, the Covid-relief package contains $130.2 billion in funding for local governments. The bill provides $20 billion for tribal governments and $4.5 billion for U.S.territories.
Matthew Chase, executive director of the National Association of Counties (NACo), applauds the allocation of these funds.
“For too long, the pressing challenges and needs facing our counties have outstripped our depleted local resources,” Chase said in a statement.
County governments have borne a disproportionate share of public-sector layoffs related to the pandemic’s economic impact, said Chase. “Even as the nation’s economy inches toward recovery, one in every 10 jobs yet to be recovered is from our local governments.”
Others disagree whether the funding for local governments is necessary.
Previous stimulus spending has more than covered the additional costs incurred by state and local governments due to the pandemic, said Chris Edwards, director of tax policy studies at the CATO Institute, the libertarian think tank founded by Charles Koch. “It’s pretty widely agreed that the pandemic and recession in 2020 did not hit state and local governments anywhere near as hard as originally thought.”
Media coverage is missing the fact that most county and municipal governments are funded by property taxes which have, for the most part, increased this year, said Edwards. “City and county governments generally have done well, with a few exceptions like the central business district in Manhattan, and maybe San Francisco,” he said.
But the Tax Policy Center says local governments have taken a revenue hit.
“Local governments … are more likely to rely on taxes or fees on hotel stays and restaurant meals, which have declined sharply during the pandemic,” says a blog post by the center. “Property taxes were still owed, but were delayed in some places.”
Willingham with the Center for American Progress said that while not all local governments have had lower revenue because of the pandemic, “the costs [of running local governments] are rising for everyone.”
In addition, Willingham said, “it’s important to acknowledge that, overall, rural communities tend to get overlooked when we’re talking about federal government relief.”
After the Great Recession, rural communities were left out of the economic recovery, said Willingham, causing a slowed recuperation for almost a decade afterward. “These communities deserve a large investment upfront to make sure that they’re not going to be left behind, as we try to heal moving forward.”