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Urgent Action Alert: Contact Your U.S. Senators Tonight and Monday Morning
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After a failed procedural vote late on March 22, Republican and Democratic leaders in the U.S. Senate are revisiting a potential $1.6 trillion emergency supplemental bill related to COVID-19. We only have a short window to make another push with our U.S. Senators on key needs for America’s county governments.
Among the major sticking points is the issue of potential general financial support for states and local governments, including those impacted by both increased costs for public health, public safety and overall safety net response efforts as well as those facing significant declines in revenue. While preliminary summaries released by Senate Republicans outlined important, substantial appropriations for many tailored federal programs that are either managed by or assist state and local governments (including counties), the “leaked” versions of the Senate GOP package appear silent on the issue of broader financial support and paid/sick leave provisions for local governments.
While individual counties may opt against pursuing any additional federal aid for COVID-19, the National Association of Counties (NACo) is fighting to ensure that America’s county governments, parishes and boroughs are eligible for federal COVID-19 emergency aid in the third supplemental package.
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1. State Stabilization Fund
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The National Governors Association has requested at least $150 billion for state financial assistance:
- As part of any State Stabilization Fund or other general financial support, we also respectfully request that America’s counties be eligible for direct assistance from the U.S. Treasury.
- Our nation’s 3,069 counties employ approximately 3.6 million Americans (or more than one percent of the U.S. population).
- As major employers and service providers across the country, counties provide essential public health, public safety and overall essential safety net services.
- During this unprecedented pandemic, counties are also spending considerable financial resources to protect the health, safety and economic future of our local residents.
- All at the same time that our revenues are expected to take a dramatic hit, especially those counties dependent on local sales taxes and other special use taxes.
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2. Municipal Bond Emergency Relief Act
Introduced by Sens. Menendez (D-N.J.) and Perdue (R-Ga.)
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As outlined by our partners at the Government Finance Officers Association, our key messages and requests are:
- The $3.7 trillion municipal bond market is under severe distress. We need to act quickly to provide additional liquidity from the Federal Reserve and others for this important market for state and localities to finance our operations during the COVID-19 emergency.
- The market for state and local governments is currently broken, with retail investors selling off securities indiscriminately in a panic to convert assets into cash.
- As a result, municipal bond funds are facing massive outflows. Bond fund outflows of $12.2 billion are 3x the prior historical high.
- There are no buyers right now. Our market is predominately retail investors and otherwise has limited institutional buyers to serve as a backstop.
- Every day that goes by with halted market activity risks further degradation to investor confidence in the market.
- Investors face massive losses in the secondary markets, and issuers of all sizes face the risk of being shut out of the new issue market for an unknown period of time right when they need capital the most to continue their role in combatting COVID-19.
- There has been virtually no new issue market over the past 10 days.
- Furthermore, states and some local governments may need to issue tax anticipation notes (TANs) in the coming weeks to cover for the delay in income tax receipts as a result of IRS actions to delay filing deadlines.
- States will likely need to mirror IRS deadlines for a number of reasons, if their filing dates are not automatically tied to the federal date.
- Variable rate notes have spiked interest rate payments and risk further straining budgets at the most inopportune time for states and local governments as we gear up to help combat COVID-19.
- Tax exempt weekly floating rates for municipal bonds have soared to 7-10 percent. Fixed rate bonds are yielding 200-300 percent, rather than a fraction, of U.S. Treasury comparable maturities.
- States and local governments will need extra capital immediately to offset increased costs of the COVID-19 outbreak and declining revenues.
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3. Paid Sick Leave Provision
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Amend Provisions Covering 26 USC 3111
- The Second Stimulus bill (H.R. 6201), the Families First Coronavirus Response Act, which was signed into law on March 18, 2020, creates paid sick leave and family medical leave requirements for all state and local public agency employers.
- Unfortunately, the bill treats private companies and public employers very differently.
- Both are required to provide paid sick leave, but only private sector employers will receive a tax credit to offset the costs.
- Public sector employers are explicitly prohibited from receiving these same tax credits, even though the vast majority of local governments (and special purpose districts) pay these same federal payroll taxes (i.e. Social Security and Medicare).
- Urge Congress to treat state and local governments the same as private employers by allowing those counties who would normally qualify for the payroll credits for the new requirements under the new paid sick leave and paid family leave provisions.
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During this critical, unprecedented time, NACo is focused on advocating for the needs of counties at the federal level, disseminating useful information to our members, and facilitating the exchange of effective strategies and approaches.
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We have launched www.NACo.org/coronavirus, as well as a recurring digest of key resources for counties. Click below to subscribe to updates.
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660 North Capitol Street, NW, Suite 400
Washington, D.C. 20001
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