Congress, COVID-19 and the State Budget

October 13, 2020

Legislative News

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After months of negotiations between Democratic House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin over a new round of COVID-19 stimulus aid, President Donald Trump instructed Republicans to cease negotiations until after Election Day. Earlier talks between the parties yielded an agreement to fund the government through Dec. 11, staving off a shutdown, which would have occurred on Oct. 1. The overwhelming bipartisan support for the budget allowed both parties to focus their efforts on another round of economic stimulus aid until talks were abruptly halted on the evening of Oct. 6. Talks have since resumed, and the focus has turned to an airline-relief bill. Two U.S.-based international carriers recently announced furloughs totaling 32,000 employees.

Earlier this month, the House of Representatives narrowly passed a $2.2 trillion stimulus package; however, there are no indications that the Senate plans to take up the measure. The Heroes Act is a scaled-back version of the $3.4 trillion bill originally proposed by House Democrats in May. The current version of the bill maintains key provisions, including additional $1,200 relief checks, reauthorization of the small business lending program, resumption of the $600 federal boost to the weekly unemployment benefit through January, increased food stamp benefits and assistance for the airline industry. The bill would provide $89.5 billion in direct and flexible funding to counties, which is of key importance to them, through new state and local coronavirus relief funds.

If negotiations do continue on the measure, one major stumbling block that the House and Senate will need to come to terms with is the record-setting $2.2 trillion price tag. Senate Republicans have indicated that they are not willing to entertain another stimulus bill that costs more than $1.5 trillion. Federal Reserve Chair Jerome Powell has recently advocated for continued economic stimulus, noting that too weak of a response will prolong a national recovery, resulting in depressed wage growth and decreased economic productivity. He has not publicly revealed specific numbers on what an adequate stimulus package would look like.

The CARES Act and the Paycheck Protection Program and Health Care Enhancement Act remain in effect. The $2 trillion CARES Act is the largest economic stimulus package in our country’s history. The National Association of Counties (NACo) has analyzed COVID-19-related major stimulus proposals.

Based on the state’s population, Texas received $11.24 billion in COVID-19 relief funds from the CARES Act — out of the $150 billion that Congress appropriated for the states. Gov. Greg Abbott has distributed approximately $7.14 billion to date. About $3.2 billion went to the state’s six largest cities and 12 counties with populations over 500,000, and more than $2 billion was earmarked by the governor for public education. Some members of the Texas Legislature have expressed concern over federal funds that have yet to be distributed. Nearly $5.7 billion in total federal aid remains to be disbursed by the governor, leading some to speculate whether the remainder could be used to balance the state budget for 2022-23, as well as meet any supplementary budget needs for the current cycle. Texas Comptroller of Public Accounts Glenn Hegar recently reported that September sales tax receipts were down 6.1% from 2019. Faltering sale tax revenue combined with low oil prices could place severe limits on lawmakers, who will be looking for ways to meet the state’s constitutionally mandated balanced budget requirement. Both the Texas Association of Counties and NACo have advocated for direct access to federal funding so local officials may address COVID-related needs in the timeliest manner possible.

For additional information on this article, contact Austin McCarty.