Many local governments in Maine waiting to form stimulus spending plans got key clarity on Monday when the Treasury Department launched its $350 billion program to distribute aid to state and local governments.
The aid is part of President Joe Biden’s larger $1.9 trillion coronavirus relief package that became law in March. Administration officials said payments could begin to go out in the coming days to eligible governments, allowing state, local, territorial and tribal officials to offset the economic damage from the coronavirus pandemic.
In Maine, Gov. Janet Mills has already outlined a plan to spend more than $1.1 billion in direct state aid. Counties, cities and towns are getting $500 million more in aid to buoy their budgets, with many waiting for Monday’s guidelines to begin discussing plans to spend the money. The aid could offset pandemic losses in most places across Maine, though service centers were hit hard and warn that it may take years to fully recover revenues.
The announcement came after the government reported Friday that just 266,000 jobs were added in April, a miss that the president felt obligated to address from the White House on Monday. Republicans have suggested that his relief package, with its extra unemployment benefits, has hurt hiring because people can earn more money by staying at home than working. But Biden emphasized that much of the money is being disbursed and noted new aid.
“Our economic plan is working,” Biden said. “I never said — and no serious analyst ever suggested — that climbing out of the deep, deep hole our economy was in would be simple, easy, immediate or perfectly steady.”
The president is pushing even more ambitious government spending, proposing a combined $4 trillion of investments in infrastructure, families and education to be funded by higher taxes on corporations and the wealthy. Some of that funding would build on the child tax credits and state and local government money that were part of the relief package.
Guidance from the Treasury Department listed broad categories for spending the aid. State and local governments can use the money for public health expenses. They can also offset harm from the downturn to workers, small businesses and affected industries. Money can replace lost public sector revenues. Essential workers can qualify for premium pay, and investments can be made in water, sewer and broadband internet.
But the Treasury has also placed restrictions. Officials said the funds should not be used by state and local governments to cut taxes, pay down debt or bolster reserve funds.
Mills, a Democrat, has released a plan for state aid that focuses on infrastructure and business support while replacing many economic development items that she advocated borrowing for earlier this year, including broadband expansion. Counties in Maine will get $261 million aid, with a group of larger cities getting $122 million and all other municipalities $119 million.
In Portland, which will get Maine’s largest share among cities at $46.2 million, City Manager Jon Jennings has budgeted $9 million through the 2024 fiscal year to maintain government services after he estimated $28 million in pandemic-related revenue losses. Bangor will get $20.5 million while Penobscot County will get $29.6 million.
Many other governments have been waiting for more information from the federal government to discuss detailed plans. Cities and towns were expected to lose at least $146 million in revenue in 2020, according to a Maine Municipal Association survey from August. While budget outlooks have improved since then, it may still take time for local governments to recover.
The rules released Monday came with “no real surprises,” said Kate Dufour, a lobbyist with the municipal association, saying the program gives “a good, broad path for communities to explore.”
The funding could provide a jolt of growth after the unemployment rate ticked up slightly to 6.1 percent in April, a sign of how difficult it can be to restart an economy despite an unprecedented degree of federal assistance. Labor Department figures show that state and local governments are still down roughly 1.3 million jobs since the pandemic began more than a year ago.
The aid to state and local governments has largely been pushed by Democrats, who remember how these vital sectors of the economy weighed down the recovery from the 2008 financial crisis and caused relatively modest growth. Republican lawmakers generally opposed the aid because they said it would encourage wasteful spending and noted that state tax revenues had generally rebounded from the downturn.
Local governments should expect to receive funds in two tranches, with half coming this month and the rest a year from now. States that saw their unemployment rates jump by 2 percentage points relative to February 2020 will get their money in a single payment, while the rest will receive their funding in two tranches.
Adam Levin, who researches state fiscal policy for The Pew Charitable Trusts, noted the state and local government aid amounts to roughly $1,000 for every American. He said a major factor going forward will be how the cash infusion changes state and local finances for the long term, not just in the immediate aftermath of the pandemic.
“The key to ensuring these resources yield returns is not just about the amount of funding but how that money is spent,” Levin said. “State and local leaders should take a long-term perspective on these new funds and analyze what their budgets will look like after this federal relief expires in 2024.”
Story by Josh Boak. BDN writer Michael Shepherd contributed to this report.