KEYSTONE CROSSROADS — As coronavirus cases soar in Pennsylvania, state lawmakers face a looming deadline to spend $1.3 billion in federal pandemic relief that the commonwealth received in early spring, but still hasn’t used.
If the state were to fail to distribute the money by Dec. 30, it would go back to the federal government. Democrats want to turn it into small business relief grants, or some other form of direct assistance. Republicans who control the legislature want to use it to prop up a state budget that’s suffering from pandemic-related tax revenue shortfalls.
“We certainly recognize the need that’s out there,” said Neal Lesher, a spokesman for the GOP House Appropriations Committee, of businesses and individuals who are hurting. “Unfortunately, the state is not in the same position as the federal government to be able to print new money. We will be spending the resources we have to keep the state government operating.”
Because CARES money can only be used for expenses related to coronavirus relief, Republicans are hoping to use it to cover regular budget costs that have some connection to the pandemic — for instance, salaries for certain state workers, like first responders.
It’s a version of a battle that has played out across the country as lawmakers at the state and local levels grapple with how to respond to the economic carnage of COVID-19: Should the government opt for robust stimulus spending or austerity?
On one side of the argument, legislative Republicans maintain that the top priority should be a balanced budget, without tax hikes, that keeps state spending for education, health and human services intact.
Another hoped-for round of federal stimulus hasn’t arrived, and GOP House and Senate leaders say it’s unfeasible for the state to offer its own relief aid while the budget is in turmoil.
Democrats, meanwhile, say there are other revenue-raising options to consider that could keep the budget intact while also offering needed help. They worry that failing to provide stimulus funds will devastate the economy even more.
Representative Matt Bradford (D-Montgomery), minority chair of the House Appropriations Committee, reeled off a list of proposals Democrats have been suggesting for years — a severance tax on the natural gas industry, legalizing and taxing medical marijuana, and combined reporting, a mechanism states can use to make sure companies aren’t hiding taxable assets.
“Long-term austerity is not a plan,” he said. “There are a lot of us who are very worried about declining revenues, an economy that is going to contract, the lack of federal stimulus — you add all these together, you’re setting yourself up for a contracting recession economy.”
‘It seems like nobody is willing to work together’
Pennsylvania received nearly $5 billion from the CARES Act at the start of the pandemic.
A billion automatically went to the commonwealth’s seven largest counties, to be used at their discretion. State lawmakers then used another $2.6 billion for an initial round of stimulus spending in May — sending it to counties in the form of block grants, creating a few rounds of small business grants and pushing more money toward long-term care facilities, among other things.
One of the intended uses for the money, a $300 million allocation toward property tax relief, was rejected by the federal government for not complying with CARES rules. Though lawmakers on both sides of the aisle say they plan to restructure the proposal and try again.
Not counting the contested $300 million, that leaves a billion dollars left to be spent for coronavirus relief.
The money has sat dormant for months, with House and Senate Democrats introducing pitch after pitch for how it should be used. Proposals ranged from restaurant grants to child care assistance, but to date, none have moved in the GOP-controlled House or Senate.
Small businesses across the state are now bracing for the prospect of new pandemic restrictions without a robust safety net of federal, state, and city aid programs.
The Enterprise Center, a community development corporation based in West Philadelphia, has already started fielding an uptick in calls from business owners worried about Philadelphia’s newly announced rules sharply limiting how many people can eat or shop at once.
“We are not sitting on huge amounts of grant dollars that would help them weather this storm,” said Enterprise Center president and CEO Della Clark. “All we have for them right now is … money we have borrowed to reloan to our clients.”
The main federal coronavirus relief program for small businesses, the Paycheck Protection Program, expired in August. Congress has been deadlocked over if and how to renew it.
All COVID-related small business grant funding available at the state level has been exhausted and there are no new programs in the pipeline, according to Department of Community and Economic Development spokesperson Casey Smith.
Philadelphia recently announced another $10 million dollars in small business relief, but that money will be routed to businesses that have already applied for funding but haven’t received any so far.
On Wednesday, nearly 100 hospitality workers rallied in Harrisburg to demand the majority of Pennsylvania’s unspent CARES Act funding be used to buoy their industry.
“Until the restrictions are relaxed and we are allowed to safely operate, the aid would be a short-term Band-Aid,” said Ben Fileccia, spokesperson for the Pennsylvania Restaurant and Lodging Association. “But it is crucial that it is received now, before more employees lose their jobs and more operators lose everything they’ve worked their whole lives for.”
With no clear sign of a support on the horizon, small business owners like Robert Wasserman are contemplating difficult choices to survive the winter.
Wasserman, who owns three establishments in Philadelphia and is partner in ten others, said when the pandemic closed their doors last spring the Paycheck Protection Program and other federal assistance allowed him to keep the employees on the payroll.
Now Wasserman said he expects to lay off nearly a third of his 300 employees.
“It’s really scary,” he said. “And it’s scarier for my employees.”
Wasserman said he still hopes to get some kind of assistance — but at this point, he doesn’t think it’s likely.
“It seems like nobody is willing to work together,” he said. “By the time they accomplish something, at this rate, it’s going to be too late for a lot of people.”
That’s what Rep. Bradford is worried about.
“We’re very worried about our main streets, our small businesses and individuals impacted by COVID,” he said. “We’d like to see the [CARES] money be spent in accordance with how it was originally given, to help those businesses.”
‘None of us can really control what happens in Washington’
This dilemma, over whether to use federal stimulus to fix budget holes or pump it into direct relief, isn’t unique to Pennsylvania.
Emily Maher, a policy associate with the National Conference of State Legislatures, has been tracking the ways each state has been using its CARES money. Many, she said, have mirrored Pennsylvania’s leading approach: providing direct relief early in the pandemic, and using remaining funds to plug budget holes.
She noted, though, many of their plans assumed another round of federal funding would have arrived by now.
“I think at this point, a lot of states have come to terms with the fact that a second relief package might not be coming,” she said. “I think the states were more optimistic in the summer and early fall.”
Legislative Democrats and Republicans agree that Pennsylvania’s budget hole is likely around $2.9 billion — though that estimate assumes that more federal stimulus money will be in the offing at some point.
Lesher said the Republicans’ plan, which could be released sometime this week, will seek to fill that hole with the billion dollars in CARES funding, another billion from an expected federal Medicaid reimbursement, and some creative rearrangement of existing state funds that are “sitting around.”
If lawmakers don’t spend their CARES Act funding by Nov. 30, it will automatically be divided among the commonwealth’s 60 least-populated counties — which haven’t already gotten direct federal relief — thanks to a provision lawmakers passed along with a limited, stopgap budget in May.
Democratic Gov. Tom Wolf’s office wouldn’t say exactly how the governor wants the remaining CARES dollars to be spent. But in a statement, a spokeswoman indicated he shares at least some key priorities with GOP leaders.
“The administration is working with the General Assembly to complete a balanced budget by the end of November,” Spokeswoman Lyndsay Kensinger said. “It is critical for us to finalize the budget by November to avoid furloughs and any stoppage of critical payments to providers and grantees.”
Lawmakers on both sides of the aisle are still hoping for more federal relief. But Lesher said it’s no longer an assumption.
“If we do get the money, helping our small business owners is going to be at the top of the priority list,” he said. “But none of us can really control what happens in Washington, or predict.”
Keystone Crossroads is a statewide reporting collaborative of WITF, WPSU and WESA, led by WHYY. This story originally appeared at https://whyy.org/programs/keystone-crossroads.