NC cities and towns are facing a money crisis. Will GOP leaders in Congress help?

The COVID-19 shutdown has withered local governments’ main revenue sources: sales, property and occupancy taxes. Now local governments face a crisis unless Republican state lawmakers allocate more relief and Congress approves another round of aid.

“The economic downturn created by the coronavirus pandemic is hitting cities all across North Carolina straight between the eyes,” Paul Meyer, executive director of the N.C . League of Municipalities said in a video posted on Twitter. “We haven’t seen an economic downturn like this in decades upon decades.”

The revenue disaster was supposed to be offset by the $2.2 trillion federal CARES Act. But only towns and counties with populations above 500,000 qualified for direct payments. In North Carolina, that’s a short list – one city, Charlotte, and three counties, Mecklenburg, Wake and Guilford.

All the rest are waiting for the General Assembly to fully allocate the $3.5 billion it received from the CARES Act. Of that, $150 million has been allocated to help local governments, with another $150 million held in reserve, but federal rules restrict that money to use for direct COVID-19 related expenses. It won’t offset general revenue shortfalls.

Meanwhile state Senate leader Phil Berger is balking at giving local governments their full share as defined by U.S. Treasury guidelines. The guidelines say the state “should” distribute 45 percent of what it receives under the CARES Act to local governments. Berger noted that “should” is not “shall,” and he says that North Carolina is different than most states in that state government pays a greater share for roads and local schools. “I don’t believe the CARES legislation requires us to send 45% of the money to local governments,” he said.

Even if the local government allocation is increased substantially, the funding would not be enough to prevent a crisis for small towns and big cities alike. If lost tax revenue is not replaced, city and county employees may be furloughed or laid off, services limited and public safety spending reduced.

What’s needed is a second wave of federal aid, this time sent directly to local governments regardless of their size. It’s not simply a matter of protecting full municipal services. It’s also important for the recovery of the economy. Government spending in a recession sustains and creates jobs.

Cary Council Member Jennifer Robinson, who is president of the N.C. League of Municipalities, said in a statement, “For cities and towns to continue to be catalysts for economic growth, revenue shortfalls created by this pandemic must be addressed. We need assistance from Congress and from state legislators.”

Raleigh Mayor Mary-Ann Baldwin worries that the increasing number of COVID-19 cases may extend social distancing restrictions and the loss of local tax revenues. She said. “This heightens the sense of urgency and action needed on the federal level.”

Potential help is taking shape in Congress. The House has passed the HEROES Act, which includes nearly $1 trillion in relief for state and local governments. In the Senate, a bipartisan bill, the State and Municipal Aid for Recovery and Transition (SMART) Act would provide $500 billion to states, counties and cities.

Unfortunately, the House bill is unlikely to get through the Republican-controlled Senate. The Senate measure is being held up by Majority Leader Mitch McConnell, who has suggested that states should consider bankruptcy. He wants to assess the effect of the first wave of relief before approving another.

The CARES Act didn’t provide enough care for local governments. and the General Assembly is compounding the problem as it debates how much of the federal relief cities and towns should receive. That needs to change.

This story was originally published June 11, 2020 at 12:00 AM with the headline "NC cities and towns are facing a money crisis. Will GOP leaders in Congress help?."