U.S. Senate Kills “Skinny” COVID-19 Relief Package, Path Forward Remains Unclear

The United States Senate failed Thursday to advance a targeted COVID-19 relief package, dampening the prospects that Congress will pass another round of much-needed financial relief to mitigate the economic and health care crises.

The legislation, Delivering Immediate Relief to America’s Families, Schools, and Small Businesses Act, would have provided $500 billion in federal spending and loans, but also contained offsets in the form of rescissions of hundreds of billions in unspent funding authorized under the Coronavirus Aid, Relief and Economic Security (CARES) Act. The Republican-led bill was defeated by a 52-47 vote, not meeting the 60-vote threshold needed on a procedural step to move toward passage.

Senate Minority Leader Chuck Schumer slammed the proposal, saying that Republicans were moving in the “wrong direction” by introducing a scaled-back version of their 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. While the HEALS Act provides no new aid to states 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.

Democrats are pushing for a far more robust package, which includes hundreds of billions of dollars in needed aid for states and local governments, more generous jobless benefits, and relief for renters and homeowners, along with other provisions in the House Democrats’ HEROES (Health and Economic Recovery Omnibus Emergency Solutions) Act, a $3.5 trillion relief bill that passed in May. The HEROES Act 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.

Lawmakers Shift Focus to Avoiding Federal Government Shutdown

Lawmakers are now expected to focus on passing 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 this year 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

Previous Conduit Street Coverage: COVID-19 Relief, Spending Deadline Loom Large as Congress Returns to D.C.

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