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06:29 - Source: CNN
CNN  — 

US states and localities have used less than 25% of the funds allocated by Congress to address coronavirus relief efforts, according to a new report from the Treasury Department.

The report underscores an issue that bedeviled state and local officials in the wake of the passage of the $2.2 trillion emergency economic relief package – that strict federal rules designed to ensure the funds are spent on Covid-related expenses has kept much of the money bottled up in local coffers, even as these places face huge budget shortfalls.

It also comes in the middle of an intense debate over distributing more funds to states. Democrats, in a $3 trillion House-passed relief measure, would send an additional $1 trillion to states and localities. Senate Republicans, in their proposal introduced this week, moved to add flexibility to the current federal rules, but added no new funds.

Congress agreed in March to disburse $150 billion in state and local aid, but of the $139 billion that has been paid out to this point, roughly $34 billion has been utilized for costs incurred, according to the Treasury report.

While Treasury’s numbers reveal that a large chunk of money remains unspent, counties, states and cities have argued for weeks that part of the reason for that is they don’t have flexibility to spend it how they need to to keep from slashing budgets.

Another issue raised by many local governments is the problem they’ve had with their own states for not quickly disbursing funding to city and county governments. As the law was drafted, only cities or counties with populations above 500,000 got direct funding from the federal government.

The data for the Treasury report was derived from self-reported submissions, according to the report, and includes the amount paid to each state as well as a number of localities, along with the costs incurred to utilize those funds up through June 30.

Some states have used little to none of their money, according to the report. California has utilized the largest portion of its total allocated funds up to this point, at 75%.

Still, governors and local officials, on a bipartisan basis, have pleaded with lawmakers to provide more funding. The National Governors Association has called for an additional $500 million.

“Nearly every category of state and local revenue is experiencing pandemic-related losses,” Maryland’s Republican Gov. Larry Hogan, the chairman of the NGA, and New York’s Democratic Gov. Andrew Cuomo said in a Wednesday statement.

The pair called the Senate GOP proposal “disappointing,” but said they saw “significant common ground” for an agreement on new funds.

Moody’s analytics estimated that without an additional $500 billion in federal assistance to local and state governments over the next two years, the spending cuts and tax increases communities will need to make could delay recovery and cost additional jobs far into the future.

But the path forward on new funding remains a central flashpoint to the current talks. House Speaker Nancy Pelosi has made the additional funds a key pillar of the talks and called the overall criticized the overall GOP approach to this point as “one of condescension and disrespect for America’s working families.”

Republicans have been more divided on the issue, with Sens. Susan Collins of Maine and Bill Cassidy of Louisiana signed onto a Senate Democratic bill that would provide local governments with a more direct cut of federal funding and give them additional flexibility to use federal dollars to pay bills due to lost revenue from the pandemic.

Others in the conference, however, are opposed to any new funds, and some have raised significant concerns that new flexibility on the existing pot of money would only serve to allow states and local governments to cover shortfalls that existed or were developing before the coronavirus hit.

“The biggest thing I’m concerned about is bailing out the states,” said Florida Sen. Rick Scott, who has led the fight against the new funds. “Basically now Florida taxpayers, many have moved from Illinois, moved from New York and now they’re going to pay for the excesses of these other states.”