The Deal is Done: How Much Can Cities Expect from the 3rd Coronavirus Package?

Today, Congress passed and the President signed the CARES Act, which, among many things, provides local governments funding to meet the immediate needs of residents, households, and small businesses on the economic margins. The Coronavirus Relief Fund, established under the CARES Act, provides $150 billion for state, local and tribal governments to use to cover any costs related to COVID-19 that had not been previously budgeted for and were incurred between March 1 and December 30, 2020. While the majority of the money will go to states, the bill allocates direct financial assistance to cities above 500,000 in population. When a unit of local government receives funds, it will reduce the amount available to its own state by the amount a unit of local government receives. Under the bill, units of local government will receive 45 percent of the funding allocated to the state in which the unit is located. There is no provision that requires a state government to distribute money to local governments.

Despite only large cities receiving direct funding, 86 percent of Americans support the federal government providing funds directly to cities and towns to support coronavirus challenges in local communities. There is no provision in the bill that requires a state government to distribute money to local governments.

NLC analyzed the funding and population data for large cities to uncover how much the 36 cities that pass the population threshold will receive in direct financial assistance.

By the Numbers

Under the Coronavirus Relief Fund, up to approximately $8.2 billion may go directly to cities to support communities and their fiscal capacity to respond to COVID-19.

Each state is allocated at least $1.25 billion, 45 percent of which will be directed to cities over 500,000 in their state, based on a population formula. For example, New Mexico, with a relatively low state population of 2.1 million, is expected to receive the minimum amount of $1.25 billion from the federal government, according to Federal Funds Information for States. How much of that $1.25 billion will go to the city of Albuquerque depends on its population. With a population of about 560,000, Albuquerque makes up about 26 percent of the state’s population. So Albuquerque’s share of that $1.25 billion would be about $325 million. However, Albuquerque won’t receive that entire amount because of the guidelines established by the CARES Act. It will receive only 45 percent of that amount, or $149 million.

Map: Direct Funding Allocations for Cities above 500,000 in Population

The amount of direct funding for cities ranges from about $90 million for Fresno, California to $1.5 billion for New York City.

Additional Funding for Cities, Towns and Villages

Aside from the Coronavirus Relief Fund, cities, towns and villages can expect to receive federal funding from a variety of programs to assist in the local government response to this public health crisis. For example, funding for Transit Infrastructure Grants ($25 billion) will help transit providers, which are primarily led by local governments, cover operating and capital expenses. The Federal Transit Administration will distribute funding proportionally using existing formulas within seven days of enactment of the CARES Act.

Other programs, such as the Byrne-Justice Assistance Grant program and Assistance to Firefighter Grants, will be rolled into current funding levels for FY20 and awarded to local governments through the typical grant application process.

Additionally, a number of programs funded through the CARES Act will provide a portion of the supplemental funding to cities, towns and villages, typically based on current formulas and available for expenditure through FY20 or FY21. For example, under the U.S. Department of Agriculture, the bill provides an additional $25 million for the existing Distance Learning, Telemedicine, and Broadband Program, plus $100 million to extend the ReConnect competitive rural broadband grant/loan program through the end of FY2021.

For Homeless Assistance Grants, $2 billion will be allocated by formula to current FY20 grantees within 30 days of enactment and $2 billion will be allocated directly to states or local governments by a formula to be developed by the U.S. Department of Housing and Urban Development (HUD) with allocations made within 90 days of enactment.

For the Community Development Block Grant, $2 billion will be awarded to FY20 grantees that received formula allocations within 30 days of enactment; $1 billion will be awarded to states and insular areas, including entitlement and non-entitlement communities, within 45 days of enactment; and $2 billion will be distributed to states and local governments at the discretion of HUD on a rolling basis based on need. The CARES Act also suspends the 15% services cap so that grantees may spend additional funds on assistance to low-income households.

Click here for NLC’s full summary of key programs for local governments.

Conclusion

The CARES Act provides for many of the immediate needs of municipal governments to prevent economic decline. Unfortunately, for the governments themselves and their residents, it will prove insufficient for intermediate and long-term economic stabilization, particularly for those communities that have not yet fully recovered from the Great Recession. Funding distribution should rely not only on population, but also economic need, COVID-19 impact and fiscal capacity of local governments to meet the needs of their communities.

Now that Congress has finished this “phase 3” coronavirus lifeline package, NLC continues to urge Congressional leaders to move forward with a “phase 4” stimulus package that provides the necessary economic jump-start for communities of all sizes through additional direct investments in cities, towns and villages and important programs. Let Congress know what your community needs through the NLC Take Action page.  

For more local government resources related to the coronavirus, visit www.nlc.org/coronavirus.

About the Authors:

Christiana McFarland is NLC’s Research Director. She leads NLC’s efforts to transform city-level data into information that strengthens the capacity of city leaders and that raises awareness of challenges, trends and successes in cities. Follow her on Twitter @ckmcfarland.

Carolyn Berndt is the legislative director for sustainability on the NLC Federal Advocacy team. Follow Carolyn on Twitter at @BerndtCarolyn.

Anita Yadavalli is the Program Director of City Fiscal Policy at NLC. Anita leads NLC’s Public Sector Retirement initiative, with a focus on research and education for city leaders on retiree healthcare benefits, as well as research and programming on other city fiscal policy issues.