Senate Bill Could Give Governors $500 Billion They're Asking for in Coronavirus Aid—If It Makes It Through Congress

Governors may finally get their long-sought-after $500 billion in federal coronavirus aid but the devil, several told Newsweek, is in the details.

Senators Bob Menendez (D-N.J.) and Bill Cassidy (R-L.A.) have proposed a $500 billion fund for state and local governments as part of the next coronavirus relief package. The State and Municipal Aid for Recovery and Transition (SMART) bill would distribute the money according to population, infection rates and revenue loss.

It's the exact amount requested by the National Governors Association, which is a feat, considering the partisan infighting that has surrounded legislation related to the COVID-19 outbreak. The NGA—led by Governors Andrew Cuomo and Larry Hogan—just re-upped their request for $500 billion to offset revenue losses brought on by the health crisis in a letter to Congress on Tuesday.

New Jersey Governor Phil Murphy praised the proposal, and told Newsweek that it "will provide us with a critical resource during this unprecedented time and prevent draconian budget cuts that would negatively impact our state's fiscal stability and ability to meet the needs of New Jersey's nine million residents."

David Adkins, the director of the Council for State Governments, told Newsweek that the bill is "promising" and that it could be just enough to offset the expected 15 percent to 20 percent revenue loss, or roughly $400 to $500 billion, states will experience due to the coronavirus pandemic.

"This $500 billion amount, if it's flexible enough to replace revenue losses, would help states weather the storm without significant cuts to the very services that are needed right now: police, fire department, hospitals and health care workers," he said.

The Cassidy-Menendez proposal would work like this: One-third of the funds, or $166 billion, would be provided to all 50 states and the District of Columbia. Then the rest of the money would be divvied up according to a state's share of the total U.S. infection rate and the loss of revenue that governments have experienced due to coronavirus-related restrictions.

It would also expand eligibility to include counties and towns with populations of 50,000 or greater—the current threshold for federal aid is 500,000—although even with the expansions, it's still likely to exclude thousands of cities.

"There are approximately 780 municipalities that would benefit from this bill and there are approximately 19,000 municipalities in the United States. So the reality is, as the bill is proposed now, many cities, towns and villages would be cut out," Irma Esparza Diggs, the director of federal advocacy at the National League of Cities, told Newsweek. Diggs said the NLC would support the bill with "open arms," but that in order for it to build strong bipartisan support it needs to do more for smaller communities.

While the bill appears to include much of what governors have publicly asked for, it may not make it through Congress—at least not anytime soon. Lawmakers are still in recess until May 4 and Senate Majority Leader Mitch McConnell is already pumping the breaks on the fourth coronavirus stimulus package.

"I think it's also time to begin to think about the amount of debt we're adding to our country and the future impact of that," McConnell told reporters Tuesday, indicating he's wary of approving billion-dollar packages as the economy continues to stall. "Let's weigh this very carefully because the future of our country in terms of the amount of debt that we're adding up is a matter of genuine concern."

gov andrew cuomo press briefing april 2020
New York Governor Andrew Cuomo gives his a press briefing about the coronavirus crisis on April 17, 2020, in Albany, New York Matthew Cavanaugh/Getty

Democrats have attempted to include more federal aid for states in the previous legislative packages but were unsuccessful. Republicans reportedly called the issue a "non-starter" when Democrats tried to push the funding into the latest $480 billion bill passed Tuesday, which mostly included money for small business relief programs. So far, states and local municipalities have received just $150 billion in aid from the federal government as part of the CARES Act.

But timing has become a major issue for states. Governor Cuomo, whose state is the epicenter of the coronavirus outbreak in the United States, has indicated that New York will have to cut funding for hospitals, schools and local governments by 20 percent if they don't get the federal aid soon.

"It's a little like a patient with a blood transfusion, the sooner you can get it to them the better the result," Adkins said. "Revenue has never dropped off a precipice like it is now and it's across the board."

Then on Wednesday, the top Republican seemed to pour cold water directly on federal aid to states. He told the conservative radio host Hugh Hewitt that lawmakers are "not ready to just send a blank check down to states and local governments to spend any way they choose to."

McConnell added that "we need to have a full debate not only about if we do state and local, how will they spend it."

That means the bill is likely to be watered down or altered during the process, Adkins said.

"I do think the ideas contained in the proposal are worthy of consideration but I would not anticipate that it becomes the vehicle by which funding to the states is allocated," he said.