Five Facts About Proposed New Aid to State & Local Governments

Congress will soon consider bipartisan legislation intended to help states, counties and municipalities cope with tax revenue losses caused by the coronavirus pandemic.

  1. The bill would direct $500 billion to state and local governments that received relatively modest shares of previous aid.

Bipartisan groups in the Senate and House are introducing legislation to create the State and Municipal Aid for Recovery and Transition (SMART) Fund. Sens. Robert Menendez (D-NJ) and Bill Cassidy (R-LA) are the main Senate sponsors, and the House group includes Reps. Tom Reed (R-NY) and Josh Gottheimer (D-NJ), who co-chair the bipartisan Problem Solvers Caucus. The legislation’s $500 billion would build on the $150 billion provided to state and local governments in a previous $2.2 trillion economic rescue package. Local governments generally would have flexibility in how to spend the new money, but it could not be used for state pension funds.

  1. Previous coronavirus-related spending bills focused mainly on businesses and individuals.

The largest of several recent spending bills – the CARES Act, passed in late March – appropriated an unprecedented $2.2 trillion to help the nation cope with the pandemic’s crushing economic damage. Its main thrust was to provide individuals up to $1,200 (plus $500 per child); enhanced unemployment benefits; forgivable loans to many businesses; and aid to hospitals.

  1. The new bill would help smaller cities and counties omitted from earlier funding.

The SMART Fund would send aid to counties and towns regardless of population. By contrast, the CARES Act’s aid was limited to counties and municipalities with at least 500,000 residents.

  1. Funding would be apportioned based on population, infection rates and lost revenues.

After setting aside $16 billion for Native American tribal governments, the legislation would allocate two-thirds of the remaining $484 billion to state governments, while counties and municipalities would receive one-sixth each. A third of the bill’s funding would go to entities based on their number of Covid-19 cases relative to the U.S. population. Another third would be based on state revenue losses in proportion to the combined revenue loss of all the states in 2020. The final third would be apportioned based on state populations, with no state receiving less than $2 billion in all.

  1. Proponents say state and local governments desperately need the aid.

“It’s Congress’ responsibility to help the hardest-hit communities,” Gottheimer said, and to support “those on the frontlines of this crisis, including EMS, firefighters, and law enforcement.” Reed said, “as a former small town mayor myself, I knew it was only fair that this bill protect localities and specifically safeguard the critical federal support they will receive.”


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