More than 180 groups urge Congress to pass $500 billion in unrestricted aid to state, local governments

More than 180 organizations across the country urged Congress to pass $500 billion in unrestricted aid to state, territory and local governments in a letter sent Monday.

The Economic Policy Institute, among other organizations, sent the letter to leadership in the House and Senate. The letter says the first three coronavirus stimulus bills “included vital resources” but fell “far short of what is needed to hold state, local, territorial, and tribal budgets harmless against the enormity of the crisis.”

The groups point out that many states are required to balance their budgets in their constitutions, unlike the federal government. These requirements are likely to drive these governments to make massive cuts if the federal government does not help, the letter said.

“As revenues decline because of lower incomes and reduced spending, state and local governments face serious fiscal constraints, often leading to budget cuts that further depress demand in the economy,” the letter reads. 

Several state and local governments have already announced efforts to balance their budgets. Ohio Gov. Mike DeWine (R) proposed an across-the-board 20 percent budget cut, while Arkansas’s revenue decline is estimated to amount to double the state’s reserves, according to the letter. 

“When the economy is ready to restart, these budget shortfalls will lead to large drags on the recovery if Congress does not act quickly,” the letter says. “During the Great Recession, such budget gaps and the resulting cuts severely hampered the economic recovery.”

The organizations call for congressional leaders to implement a payroll guarantee approach that the U.K., Denmark and the Netherlands have put in place, with the federal government paying 90 percent of all payroll costs for employers affected by the containment efforts.  

The groups also request more investments in unemployment insurance, another direct cash payment, stronger worker protections, and full funding for testing, treatment and personal protective equipment.

Congress has passed three stimulus bills thus far, including a $2.2 trillion stimulus package. Lawmakers from both parties have said they need a fourth stimulus bill to address the pandemic, but they have been disputing an “interim” request for more small-business funding for a program under the third bill.

Speaker Nancy Pelosi (D-Calif.) has said she wants to have a bill ready to vote on by the end of April.