U.S. Senate Republicans Unveil HEALS Act: No New Funding for State & Local Govts

us-capitol-1533368_1280U.S. Senate Republicans today unveiled the HEALS (Help, Economic Assistance, Liability Protection, and Schools) Act, a $1 trillion COVID-19 relief bill that includes reforming bolstered unemployment benefits, providing support to schools and hospitals, and a new round of economic impact payments structured identically to the rebates sent to taxpayers in the spring.

Additionally, Senate Republicans have prioritized liability protections for businesses, which would ostensibly protect them from coronavirus-related lawsuits, but opted not to include needed direct and flexible funding for state and local governments.

Counties are making significant financial investments to address immediate public health and safety needs. At the same time, counties are experiencing massive and unprecedented declines in revenue as a result of the coronavirus pandemic.

The combined effect of these changes will likely undermine county revenue structures and support for education, public safety, roadway maintenance, and other essential services.

According to the National Association of Counties (NACo):

The COVID-19 pandemic could impact county budgets by at least $202 billion through FY2021, including lost revenue, additional expenditures and state funding cuts. Despite a recovery in the unemployment rate nationwide, local governments have lost 1.2 jobs lost since March, according to the U.S. Bureau of Labor Statistics.

While the HEALS Act provides no new aid to state and local governments, the bill would expand the allowable use of the Coronavirus Relief Fund (CRF) by permitting funds for use beyond December 31, 2020, to 90 days after the end of a state or localities’ fiscal year 2021 date.

The bill would also permit states and local governments to use CRF funding to cover revenue shortfalls incurred in FY 20 and FY 21, subject to a limit of 25 percent of relief funds. States and local governments would be prohibited from using CRF funds to replace rainy day funds or pension benefits.

The HEALS Act would also modify state income taxes by mandating that “through 2024, employees who perform employment duties in multiple states would be subject to income tax only in their state of residence and any states in which they are present and performing employment duties for more than a limited time during the calendar year.”

As previously reported on Conduit Street. The U.S. House of Representatives in May passed the HEROES (Health and Economic Recovery Omnibus Emergency Solutions) Act. The bill includes two separate, equal funds for counties and cities and provides $187.5 billion in vital relief to counties to address both lost revenue and increased expenditures as the result of the coronavirus pandemic.

Congress has roughly two weeks until both chambers are scheduled to adjourn for the August recess. Leaders plan to wrap up negotiations before they adjourn, but it is unclear whether the House and Senate will be able to reach a compromise.

In addition to a fourth COVID-19 relief package, Congress will also need to work on their fiscal year 2021 spending bills in order to avoid a government shutdown at the end of September. The appropriations process, which is likely to rely on a continuing resolution, could also incorporate some short-term funding priorities related to COVID-19 recovery.

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