COVID Aid Appears Safe from a Republican Clawback

House Republican leaders on Thursday unveiled a bill that would push for dramatic cuts in spending in return for agreeing to raise the nation’s debt limit. The good news for state and local officials is that Republicans do not appear—as many feared they would—to be trying to claw back Covid aid already in the hands of states and localities.

In the bill, House Republicans are proposing to cut $130 billion in federal spending and up to, by one estimate, $3.6 trillion over the next decade. The legislation would rescind unspent pandemic relief funds under the American Rescue Plan Act and increase work requirements under the Supplemental Nutrition Assistance Program (SNAP).

That Congress is not going after coronavirus relief funds already committed to states and localities comes as a relief to many public officials. Detroit Mayor Mike Duggan had urged cities at the U.S.Conference of Mayors’ annual meeting in January to hurry up and spend the money before it was taken back.

But as first reported by Route Fifty in February, Republicans on the House Appropriations Committee had only discussed clawing back the money that the Treasury Department had not yet sent out. Spokespeople for Republicans on the committee did not return emails asking them to confirm what would be rescinded in the bill. But lobbyists for the National League of Cities (NLC) and the National Conference of State Legislatures (NCSL) said their reading of the proposal is that the money already in the hands of states and localities is safe.

If that is the case, that amount of money appears to be relatively small. While no specific figures were available, a Treasury official told Route Fifty in February that more than 99% of the funds have already been sent to state and local governments.

The money that hasn’t yet been sent out by the Treasury Department is likely supposed to go to smaller communities that applied for the dollars later than other governments, said Glencora Haskins, a senior research analyst at Brookings Metro, who has been tracking the money.

But even though committed pandemic funds appear safe for now, NCSL and NLC both cautioned in statements that a larger clawback is still possible.

Republican House Speaker Kevin McCarthy has to rally enough conservatives and centrists to support the proposal before a possible vote next week. Those on the right could push for greater cuts. (For their part, Senate Democrats have said the proposal is a nonstarter.)

“In every state, cities, towns and villages of all sizes have invested State and Local Fiscal Recovery Funds to meet the needs of their residents,” Clarence Anthony, the CEO and executive director of NLC, said in a statement. “The premature clawback of these funds would jeopardize millions of dollars in local investments in public safety, infrastructure and other top community priorities.”

NCSL noted in a statement that last December's omnibus spending bill gave state and local governments more time to spend their ARPA dollars. The association opposed having the money taken back before then, even if states haven’t figured out what to do with it.  

“The long-term challenges presented by the pandemic are complex and states need sufficient time to develop long-term solutions,” the association said. “NCSL urges against the transfer of unobligated funds before states can use this increased flexibility and put forward smartly developed proposals, especially during this time of economic uncertainty.”

Another proposal under the bill, which cities have opposed in the past, would increase work requirements for people receiving food stamp benefits. States would still be allowed to ask the federal government to exempt 12% of recipients from having to work, look for jobs or get training. Eighteen states currently have permission to exempt workers.

However, the proposal would limit the ability of states to carry over unused exemptions to following years. Currently, if a state does not use all of its exemptions in a month, it could use them in subsequent months, and sometimes years, so that more than 12% could be exempted at a time, Leslie Ford, a visiting fellow at the conservative Heritage Foundation’s Center for Health and Welfare Policy, said in an interview.

Republicans are opposed to exempting able-bodied people from having to work.

Modeled after a proposal by centrist House Republican Dusty Johnson of South Dakota, the proposal would raise the age requirement on able-bodied adults without children to those younger than 56. Only those under 50 are now required to work.

“We are $32 trillion in debt, and in six weeks our nation defaults on our debts. We are duty-bound to address both of those crises. Republicans have a reasonable plan to do so,” Johnson said in a statement. “We have worked collaboratively to put forward a plan that grows the economy, decreases unnecessary spending, and increases opportunity for Americans.”

The proposal, however, does not go as far as ideas conservatives have pushed for and Ford called the proposal “moderate.” For example, the Republican Study Committee, a study group of conservative House GOP members, last year proposed reducing the percentage of able-bodied adults that states can waive from the requirements from 12% to 5%.

The group also proposed replacing SNAP with a block grant program, requiring states to pay a greater share of the program’s costs.

The National League of Cities had no immediate comment on the proposal. But Republican Mayor John Giles of Mesa, Arizona, has opposed strengthening the work requirements. “SNAP has work requirements in place. No one should fear going without food. SNAP is intended to ensure families aren’t going to bed hungry,” Giles, chairman of the Mayors Alliance to End Childhood Hunger, a nonpartisan coalition of more than 130 mayors from 45 states and the District of Columbia, told Route Fifty last month.

For their part, Senate Democrats have said they will not support such drastic federal spending cuts. Local officials have also expressed concern about the size of the cuts being proposed. In a statement, Tom Cochran, CEO and executive director of the U.S. Conference of Mayors, said the cuts would “wipe away” the progress cities have made since the pandemic.

A similar sentiment was expressed by the NewDEAL, a national group of left-of-center state and local leaders.

“We’ve clawed and scraped our way through a once-in-a-century crisis,” the group wrote in a letter to congressional leaders. “This hard-fought progress could all be wiped out in an instant if extremists in Congress force us to default on the national debt.”