P O L I T I C A L A N A L Y S I S
One of the big shortcomings of the CARES Act – and there were a few like the initial Payroll Protection Program – was the money could not be used by states or municipalities to help make up revenue shortfalls due to the coronavirus pandemic.The first rules also did not allow the money to be used to pay the states’ or municipalities’ 25 percent match for Federal Emergency Management Administration spending, but that changed quietly about a month ago in a little-publicized federal Treasury Department filing.
Now there are discussions in Washington about allowing states and other governmental entities to use the CARES Act money to backfill revenue shortfalls.
New Hampshire’s shortfall is $145 million for the recently completed 2020 fiscal year and projected to be about twice that or more in the current 2021 fiscal year.
Cities and towns are also seeing reduced revenue due to the pandemic although that number is a little harder to peg but it is well into the tens if not hundreds of millions of dollars.
The Democrats’ latest relief package passed by the U.S. House a while ago includes substantial money for state and municipalities to replace revenue shortfalls, but the Republicans’ package released last week by the U.S. Senate leadership does not.
That caused Gov. Chris Sununu to lament the lack of money for states like New Hampshire facing significant budget deficits due to the revenue shortfall, but not enough for him to embrace the Democrats’ plan.
Governors of both parties around the country were led to believe the next relief package would contain help for their COVID-19 impacted precarious budgets, but now that does not appear to be likely as Senate Majority Leader Mitch McConnell said one-third of his caucus opposes any more relief packages.
Which says two things, if he wants a relief package he needs to include some of the Democrats’ priorities or cut the package enough to convince a few additional GOP Senators they need to pass it or face the wrath of voters impacted by the pandemic in November.
In New Hampshire, lawmakers and executive branch officials continued to fine-tune what needs to be done for businesses and health-care providers.
At the beginning of last week’s meeting of the Legislative Advisory Committee of the Governor’s Office for Relief and Recovery, director Jerry Little was asked how much of the state’s $1.25 billion share CARES Act money remained unallocated and if the state might be able to use some of the money to help with the revenue shortfall.
Little said about $250 million is not yet allocated to one of the relief or recovery programs, and probably more if allocated money is not fully utilized like the $50 million in the broadband expansion program.
GOFERR General Council Nancy Smith told committee chair and Senate Minority Leader Chuck Morse, R-Salem, who asked the question, there have been some discussions about more flexibility at the federal level but nothing has changed to date.
Morse noted the committee might have recommended allocating the CARES funds differently if it could have been used to offset revenue shortfalls.
Sununu did not appear to be hoarding the money for the state budget shortfall as last week he announced another round of applications for several programs including the emergency health system fund, which still has about $15 million available for providers and about $18 million for long-term care facilities.
However, there is bound to be tens of millions of dollars allocated to programs like the Main Street Relief Funds for businesses that will not be spent by the December deadline.
Using the unspent money to offset the currently estimated $144 million revenue shortfall for the recently completed 2020 fiscal year would make sense.
But the federal money may not be available to help cover the 2021 shortfall because it has to be spent by December or returned to the federal government.
So if you are eligible for one of the many CARES Act help program the state is offering, you best be applying soon or state elected officials may be quickly gathering all the unused money to lower the budget deficit if the federal government says the CARES Act money may be used to cover pandemic induced revenue shortfalls.
Using the money will mean less pain than the likely draconian cuts needed in the 2021 fiscal year budget to address a revenue shortfall between $350 million and $500 million for the biennium.
Earlier this summer Sununu sent department heads a letter telling them to curtail spending on all but essential services.
“There has been much discussion regarding Federal assistance to the states to offset the devastating revenue shortfalls the states are all experiencing,” Sununu wrote. “We all must be prepared for the possibility that Federal assistance may not arrive.”
The 2020 fiscal year budget ended June 30 and past the point of adjustments. Consequently, the budget cuts will all have to be made in the 2021 fiscal year budget.
Making this more complicated is a budget provision requiring the hard hit by COVID-19 Health and Human Services Department to reduce its budget by $25 million. To date lawmakers have seen little information on how the department will accomplish the reduction.
In general, Sununu’s letter directs agency heads to spend the “minimum amount necessary to continue the operations of State Government.”
No money is to be spent on new programs or expansions for existing programs, nor consultants unless critically necessary, nor on capital construction or technology projects not past the development stage.
Sununu also urges department heads to spend only the minimum amount “to comply with Federal and State requirements for programs, make payments for the salaries and benefits of state employees, make payments for healthcare costs of State retirees, and make payments to meet contractual or other legal obligations, including debt service and guarantees of the State.”
And he asks department heads to prepare proposals reducing agency general fund spending by 20 percent and highway fund spending by 10 percent.
Those proposals were due to the governor last month.
“State agencies must be prepared for significant reductions to their Fiscal Year 2021 State Fund appropriations,” the governor wrote, “with those reductions continued though the ensuing 2022 – 2023 Fiscal Biennium.”
That would indicate the governor’s financial folks do not believe there will be a rebound to pre-COVID-19 level revenues for at least three years.
What does that mean? Well the new Secure Psychiatric Unit at the state hospital is not going to be built any time soon, nor will other projects. And the expansion of I-93 through Concord will have to wait a little longer.
And the likelihood of more federal stimulus money beyond the package currently being negotiated or more accurately fought over in Washington this weekend is not good until a new Congress is seated next year.
The lawmakers elected in New Hampshire will face the daunting task of trying to craft a new state budget next spring that will be extremely painful for many state residents.
And the CARES Act money will be gone leaving nothing to soften the blow.
The coronavirus will continue to disrupt state and local finances long after a vaccine is developed.
Returning to normal is and will be impossible. The virus has already permanently changed New Hampshire, the United States and the world.
Garry Rayno may be reached at firstname.lastname@example.org.