COVID-19 Relief, Spending Deadline Loom Large as Congress Returns to D.C.

COVID-19 relief negotiations and avoiding a government shutdown are top of mind. but no action is expected on either of these issues until later this month.

The U.S. Senate returns to Washington today and U.S. House committees are scheduled to hold hearings this week, holding off on floor action until next week. And while Congress convenes for an abbreviated pre-election session, negotiations on a new round of federal COVID-19 aid remain stalled, and lawmakers have yet to take action to avoid a government shutdown when the fiscal year ends on September 30.

Federal COVID-19 Relief

Negotiations on a fourth COVID-19 relief bill failed before the Senate recessed in early August, and there are no signs of progress on a new coronavirus relief package.

While the U.S. Senate is expected to vote on a “skinny” COVID-19 relief package, Senate Minority Leader Chuck Schumer slammed the proposal, saying that Republicans would be moving in the “wrong direction” if they were to vote on a scaled-down bill. “Republicans may call their proposal ‘skinny,’ but it would be more appropriate to call it ’emaciated.’ Their proposal appears to be completely inadequate and, by every measure, fails to meet the needs of the American people,” Schumer wrote in a letter last week.

U.S. Senate Republicans in July 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.

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

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 fiscal 20 and fiscal 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.

Government Shutdown Looms

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 could also incorporate some short-term funding priorities related to COVID-19 recovery.

According to Politico:

The only good news heading into the September session is that Pelosi and Treasury Secretary Steven Mnuchin have reached a tentative agreement to continue funding federal agencies beyond the Sept. 30 deadline, taking the possibility of a government shutdown largely off the table. Some lawmakers and aides have discussed attaching relief provisions to a stopgap spending bill, but reaching a consensus there could be difficult.

A short-term spending measure, known as a continuing resolution, is almost a certainty since the Senate has failed to take up a single fiscal 2021 spending bill. But just how long a stopgap funding package should last is still up for debate. Lawmakers could defer spending decisions to a lame-duck session after the election or put forth a longer continuing resolution that runs into 2021.

While a continuing resolution temporarily ensures that the government will remain open, it signals that lawmakers are, once again, unable to agree on a series of year-long spending bills before the ones from the previous year lapse at the end of the month.

A similar situation in 2019 led to the longest government shutdown in U.S. history. That impasse, which lasted 35 days, had a significant impact on federal employees, as well as related segments of the Maryland and regional economies.

As previously reported on Conduit Street, approximately 172,000 Marylanders impacted by the 2019 partial government shutdown missed out on an estimated $778 million in wages, resulting in $57.5 million less in state and local income tax withholding and $2.1 million less in sales tax collections. While furloughed federal workers received back pay once the shutdown ended, it’s unlikely that federal contractors were able to recoup lost wages.

In response, the Maryland General Assembly passed the Federal Shutdown Paycheck Protection Act, which provides for no-interest loans to essential government employees in the state who must report to work without pay.

Stay tuned to Conduit Street for more information.

Useful Links

Conduit Street Podcast: A Conduit St Look at Pennsylvania Avenue

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

Previous Conduit Street Coverage: U.S. House Passes $3T Stimulus Bill, Faces Pushback in Senate

Previous Conduit Street Coverage: Federal Government Shutdown: State, Local Governments Feel the Pinch

Previous Conduit Street Coverage: “Federal Shutdown Paycheck Protection Act” First Bill Signed into Law

Politico: Senate Returns With a Path to Nowhere on Coronavirus Aid