The Biden administration is giving states and municipalities more flexibility to hoard money from a $100 billion pot of unspent pandemic relief through 2024 after billions have been spent on golf courses, lottery prizes in New Mexico for people vaccinated for COVID-19 and legal services for asylum-seekers in Illinois.
A little-noticed rule from the Treasury Department, published before Thanksgiving, relaxes how states and municipalities must legally obligate money from the $350 billion Coronavirus State and Local Fiscal Recovery Fund by the end of next year. The fund was created as part of the $1.9 trillion American Rescue Plan signed by President Biden in 2021.
The rule change creates an election-year “Bidenomics slush fund,” according to a report by the Economic Policy Innovation Center, a right-leaning think tank. It says the rule change allows state and local governments to count funds as obligated beyond 2024 if they are merely reported to Treasury by April.
“In essence, Treasury is offering a slush fund pathway to state and local governments as a way to ensure at least the covered billions of SLFRF dollars are not left on the table when it could be spent on the salaries of local bureaucrats and other loosely administrative or compliance expenses,” the report said.
A Treasury spokesperson told The Washington Times that the existing deadline for state and local governments put in place by Congress has not changed.
“To address grantee questions, Treasury clarified what recipients must do to meet a particular December 2024 cost incurred deadline that was established by Congress,” the spokesperson said.
Based on the most recent data from Treasury, about $90 billion of the original $350 billion appropriation has not been approved through an adopted budget, authors Paul Winfree and Brittany Madni wrote in their report. “This pot would likely be impacted by the Hoarding Rule.”
Further, states and local governments have obligated only 56% of the total appropriation for the $350 billion program. The new rule promises to give them more time and wiggle room to spend the money rather than return it to the federal government, which ran a deficit of about $1.7 trillion in fiscal 2023.
The pot of money was created largely to help state and local governments replace lost tax revenue during the economic downturn of COVID-19 lockdowns. The pandemic’s impact on revenue was not as bad as feared, the report said, partly because of “shifting work from home during the pandemic and rising property values.” It said state and local revenue increased 24% overall from 2020 to 2022 and state rainy day funds doubled during the same period.
A Government Accountability Office report this year found that, as of March 31, states spent $88.2 billion, or 45% of their awards from the recovery fund, and localities spent 38% of their awarded money. The GAO said 14% of localities had not reported to Treasury how they spent their money, as required by law.
Mr. Winfree, a budget official in the Trump administration who now serves as president of the Economic Policy Innovation Center, and Ms. Madni, the center’s executive vice president, said the recovery fund “is funneling taxpayer money into projects that have limited connections (at best) to the COVID-19 pandemic.”
They said more than $185 million has been approved for projects related to golf courses, such as updating irrigation systems or buying golf carts, more than $400 million has gone to improve swimming pools, nearly $80 million has gone to sports stadiums, $34 million has gone to building tennis and pickleball courts, and $10 million has gone to rodeos.
“One town even got $15 million to install showers and a commercial kitchen at a site to host the circus and local flea market,” they wrote. “[And] $4 million even went to the Field of Dreams in Iowa,” where Major League Baseball hosts its annual late-summer game.
As for “politically controversial purposes,” they wrote, Treasury approved $4.2 million to provide legal services for immigrants, refugees and asylum-seekers in Illinois. Another $12 million was approved to provide housing for refugees and asylum-seekers in Massachusetts, and $2.2 million has been approved to provide a community space for asylum-seekers crossing the southern border into Arizona.
“The SLFRF is also being used to fund diversity, equity, and inclusion (DEI) coordinators in at least three states whose job is to apply for additional grants from the federal government,” their report said.
In New Mexico, state officials used $16 million from the pandemic recovery fund to run a lottery for people who received the COVID-19 vaccine.
Gov. Michelle Lujan Grisham, a Democrat, promoted the “Vax 2 the Max” sweepstakes, with $10 million in cash and other prizes available and a grand prize of $5 million.
In a June report, the National Association of Counties said many counties and municipalities deployed a “dual track” strategy by spending to stabilize local government budgets and investing in “a more equitable economy.” The group studied spending in 17 counties and cities.
“Localities have been impressively entrepreneurial and innovative in setting priorities for SLFRF dollars in ways that drive greater inclusion and equity in their communities,” the association said. “Local leaders arrived at these priorities amid considerable uncertainty in the SLFRF rulemaking process and broader political debates in their communities.”
The Economic Policy Innovation Center’s report said too much of the spending is not documented.
“There is also much that we do not know simply because the reporting, including by Treasury, has been so poor,” the report said. “How is this possible? The Treasury Department does not just enable it; the agency is actively encouraging this sort of taxpayer abuse.”
Treasury’s new rule amends the definition of obligated funds to include “any additional costs of ‘terms and conditions’ that are associated with approved programs and activities,” the report stated.
“The possibilities for how these dollars could be spent are vast; we are yet to see a limitation on how state and local governments are to interpret reasonable parameters for meeting these ‘terms and conditions’ requirements,” the report said.
In a notice published in the Federal Register late last month, a Treasury official said the new rule is necessary “to provide additional flexibility to recipients, providing clarification regarding the application of the obligation deadline to subrecipients, and providing guidance regarding the amendment and replacement of contracts and subawards.”
Treasury initially defined “obligation” for spending the money as “an order placed for property and services and entering into contracts, subawards, and similar transactions that require payment.” The department has set a deadline of Dec. 31, 2026, for spending the money.
For more information, visit The Washington Times COVID-19 resource page.
• Dave Boyer can be reached at dboyer@washingtontimes.com.
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