Paul Hennessy/SOPA Images/Sipa USA via AP Images
Nurse Jill Dortha administers a dose of the Pfizer COVID-19 vaccine to Karen Guerrina at a vaccination clinic at Winter Springs High School, September 11, 2021, in Winter Springs, Florida.
The end of the COVID-19 public-health emergency (PHE), set for May 11, could affect the $350 billion State and Local Fiscal Recovery Fund (SLFRF) that was part of the American Rescue Plan. The bulk of that fund’s money, more than $200 billion, has not yet been spent, and while there is clear authority in the law that recipients have until the end of 2024 to make decisions about the fund, the appropriation and several portions of the law’s text describing the proper uses of the money refer to the public-health emergency.
That means a conservative judge or a skittish executive branch could decide that certain SLFRF projects could no longer be undertaken, or even that the whole program was tied to the PHE and therefore must be shuttered, with unobligated funds returned to the federal government.
The Treasury Department, which oversees the program, remains committed to its continuance. And should a court cancel a fund with an explicit statutory timeline because of a separate reference to an expired executive order, it would be a massive expansion of judiciary power, although the current right-wing Court seems fine with such drastic actions.
Still, the very possibility reinforces how impactful the end of the COVID emergency could become. Already, millions of Medicaid patients are poised to be thrown off their state rolls, and food stamp recipients will see less money in their allotments. The emergency’s end will also make it harder to obtain mental health and substance abuse treatment. Now, on top of that, there could be changes to a recovery fund that many states and localities have relied upon for budget needs, as we head into a potential economic downturn.
PRESIDENT BIDEN ANNOUNCED LAST WEDNESDAY that he would not veto a one-line bill ending the COVID national emergency. The administration had already scheduled to wind down the emergency order on May 11, but the legislation would accelerate that. The bill passed the Senate 68-23 on Wednesday and passed the House in February. That means that the national emergency will end any day now.
The public-health emergency, which is separate from the national emergency, remains scheduled for termination on May 11. And it’s the PHE that is cited throughout the language of the American Rescue Plan in relation to the SLFRF.
The SLFRF delivered $350 billion to state, territorial, local, and tribal governments. The money can be spent out until the end of 2026, but it must be obligated (meaning designated for specific purposes) by the end of 2024. An Economic Policy Institute study released last month found that only about 55 percent of the state funds have been obligated, with several states obligating less than 10 percent. Because of the timing of state legislative sessions, some states must figure out how to obligate those funds within the next three months.
While it hasn’t raised much attention, the SLFRF, whose implementations the Treasury has documented in this interactive map, is being put to widespread use. Colorado, Tennessee, and Washington state are improving their unemployment insurance systems. Alabama is setting up a middle-mile fiber optic network to facilitate broadband expansion. Idaho has invested in high-quality child care. Numerous cities are using the money to establish guaranteed income pilot programs. There has been $16 billion in housing affordability projects and $4.5 billion in small-business assistance, according to the Treasury Department.
The bulk of the SLFRF has been used by states and localities to backfill revenue that was lost as a result of the economic shock of the pandemic.
But the law’s text states that SLFRF appropriations are intended “to mitigate the fiscal effects stemming from the public health emergency.” And more references to the PHE can be seen when the law refers to specific options for using the funds. There are four basic options: revenue replacement, support for public health and impacted individuals and industries, premium pay for essential workers, and targeted infrastructure needs.
The “premium pay” option, which has been used to supplement the paychecks of 1.4 million workers in Minnesota, Delaware, Oxnard, California, and elsewhere, is intended for “workers performing essential work during the COVID-19 public health emergency.” Without a PHE, that option may be unavailable. The public-health provisions, which include vaccination programs, data systems, personal protective equipment, public communication, telemedicine capabilities, and many more options, are similarly designated for response to the PHE, so they could be disallowed as well.
Assistance to impacted individuals and industries (from small businesses to such COVID-impacted industries as travel and tourism firms) is also supposed “to respond to the public health emergency.” Capital projects for tribal governments also refer to the PHE, though state and city investment in water, sewer, and broadband infrastructure does not have such a reference.
Philip Rocco, a political science professor at Marquette University who has been closely studying the SLFRF, pointed out that few governments have actually used SLFRF funds for premium pay or medical assistance. The recently released American Rescue Plan two-year anniversary report stated that just $11.8 billion of the $350 billion had been obligated for public health. “Workforce support” took up $10.8 billion, only a portion of which went toward premium pay.
According to Rocco’s research, the bulk of the SLFRF has been used by states and localities for revenue replacement, to backfill revenue that was lost as a result of the economic shock of the pandemic. That use of funding is authorized “due to the COVID-19 public health emergency,” but it’s intended to be used to offset revenue loss incurred during that emergency. Just because the emergency ends doesn’t mean that the offsets cannot be employed.
It might be a stretch to say that the end of the PHE means the money can no longer be spent. But many cities and states have been hesitant to get creative with the funding and use it to make targeted investments, hence the fallback on revenue replacement. And we know that right-wing judges have been all too willing to appropriate lines of statutory text to their own ends.
“The fact that the possibility exists is gigantic,” Rocco said.
TREASURY DEPARTMENT GUIDANCE ON USE OF FUNDS is littered with references to the pandemic and the public-health emergency. There are reporting requirements for states and localities to justify to Treasury that their spending falls within the boundaries of the rule.
The final rule specifically states that the money supports states’ and localities’ “response to and recovery from the COVID-19 public health emergency.” It also says that determining an impacted individual or industry should be done in relation to the PHE. Public-sector staff rehiring is also supposed to take into account the PHE, as are some capital expenditures. Even the final rule’s language on broadband infrastructure notes its importance during the PHE, though the statute itself never mentions the PHE in relation to broadband.
Treasury sees the funds tied to the statute rather than any emergency declaration. But because of the references to the PHE, advocates have stressed the need for clear guidance from the department that cities and states can rely upon to continue spending down the SLFRF.
One challenge for right-wing operatives who may want to pounce on the statutory text to attempt to cancel the SLFRF is that red states have fought for the funding. Several states have used the revenue replacement feature to stabilize budgets and effectively finance tax cuts. This was theoretically disallowed by the law, but states got court rulings to allow their tax-cut schemes to go forward.
It would be strange to turn around and argue to the same courts that the money that financed those tax cuts should not be allowed to go through. Red states waged time-consuming legal battles to ensure that those funds wouldn’t be clawed back. Claiming that the end of the PHE now means all the money must be returned would be quite an argument.
Of course, conservative state lawmakers are likely to pursue tax cuts anyway; the SLFRF made sure that they weren’t coming at the expense of vital state services, which beats the alternative. Hundreds of billions in recovery funds helped ensure that state and local austerity would not cancel out federal stimulus. Rolling back any sum of the appropriation would put that dynamic into reverse, and threaten economic calamity.
If the PHE disrupts the pot of funding at all, the most likely outcome is that additional money that might have gone to public health or premium pay will have to be rechanneled elsewhere. But even that would be problematic. It would mean that so-called essential workers will see less in their paychecks, and that public-health providers will have fewer resources to deal with any resumption of pandemic outbreaks or just to serve their current patients. And if the funds were already obligated and now, due to the rules, cannot be spent, it’s unclear what might happen with that money. It’s another example of the maddening implications of emergency legislation that’s often hastily written and implemented.
