April 08, 2020

By Elizabeth Kellar, the Director of Public Policy at ICMA, the former President and CEO of the Center for State and Local Government Excellence, and a Fellow of the National Academy of Public Administration.

Cities and counties across the country have been on high alert since the first community spread of COVID-19 was documented at a nursing home in Kirkland, Washington in late February. The city government there faced an immediate emergency response challenge when nearly 30 firefighters and police officers had to self-quarantine following contact with the nursing home’s patients.

Just a few days later in Norwood, Massachusetts, the town manager, school superintendent and several other top staff also had to self-quarantine after being exposed to the virus at a neighborhood event. Since then, local governments across the country have grappled with everything from how to handle public meeting requirements in a social distancing world to the desperate search for the personal protective gear needed by those on the front lines.

The resulting stresses on public health, the workforce, and state and local government budgets have been excruciating. For the foreseeable future we will be immersed in an intense public health response period. And yet, we also have to think about how to best confront and mitigate the long-term economic hardships ahead. Local and state government leaders have been speaking up, gathering data and raising alarm bells.

For example, the International City/County Management Association (ICMA) has worked closely with the National League of Cities (NLC), National Association of Counties (NACo), U.S. Conference of Mayors (USCM), and Government Finance Officers Association (GFOA) to provide data to Congress and the White House on the fiscal impact of COVID-19. In just 24 hours, 750 chief administrative officers in local governments responded to an ICMA survey with estimates of current and anticipated costs of the response effort. Respondents reported that every source of local government revenue is falling.

The good news is that intergovernmental collaboration is occurring. State governors are having regular calls with the White House. National state and local government associations, including ICMA, are having weekly calls with the White House Office of Intergovernmental Relations as well as the Federal Emergency Management Agency (FEMA) Office of Intergovernmental Relations. FEMA has begun to operate in a more traditional framework now that its legal relationship with the U.S. Department of Health and Human Services (HHS) during this public health emergency has been clarified. FEMA has been rationing supplies from the national stockpile as it waits for supplies to arrive from other countries and for the production of ventilators in the United States.

At the state and local level, the Big 7 (National Governors Association, NLC, NACo, National Conference of State Legislatures, Council of State Governments, USCM, and ICMA) and many others are working together to address an overwhelming number of urgent and important issues.

First, access to the capital market is virtually nonexistent now that the municipal bond market has frozen. Municipal issuers are seeking quick action from the Federal Reserve System and the U.S. Treasury Department to implement the authority they have in the latest stimulus package, the Coronavirus Aid, Relief, and Economic Security Act (CARES), to stabilize the market. State and local budgets are blowing up right and left, so state and local governments are seeking any and all federal financial support that can be provided.

Second, we know from the American Recovery and Reinvestment Act (ARRA) of 2009 that increasing the federal matching rate (FMAP) for Medicaid is a quick and efficient way to get money to cash-strapped states. The second stimulus/recovery package, the Families First Coronavirus Response Act, provided a 6.2% boost in the FMAP, but the ARRA recovery package had increased the FMAP even more, to an average of 10%.

Third, critical fiscal shortfalls remain and can be addressed in a fourth stimulus/recovery package. Big 7 priorities for that bill include federal funds to address state and local budget gaps and for immediate, pressing public health needs such as expansion, availability, and funding for personal protective equipment and testing supplies. We specifically request that the CARES Act language be revised to include funding to cover lost local revenues as well as necessary expenses related to COVID-19.

Fourth, the $150 billion stabilization fund in the CARES Act sounds great, but it leaves out direct aid to any jurisdiction with a population of less than 500,000. That precludes funds to help most state capitols, including Tallahassee, FL; Columbia, SC; Salem, OR; Madison, WI; and Salt Lake City, UT, just to name a few. The Treasury Department has indicated that a city and a county cannot join together to apply for a grant to meet the 500,000-population threshold.

Fifth, the Big 7 also has asked President Trump to direct FEMA to cover all FEMA-related grants at 100% federal cost share and remove 25% state cost share, including, but not limited to, individual assistance, public assistance and hazard mitigation to allow states and localities to better manage their dwindling financial resources.

Helping individuals and businesses stay afloat is essential to get the nation through this unprecedented crisis. Because the federal government has delayed tax filings until July 15 this year, state and local governments won’t receive the revenues they had counted on this quarter. Those that have rainy day funds are tapping them, but layoffs are looming for many cities and counties.

The federal partnership needs to work well in a collaborative manner to minimize our economic hardships and maintain vital services. State and local governments cannot run deficits, nor can they ignore the public health crisis at their doorstep. That is why federal aid is critical now.