How raising the nation’s debt limit could reduce spending of some coronavirus relief funds
With the pandemic officially over, leftover coronavirus relief money for vaccines, public health initiatives and other programs has become a target as negotiators try to reach a budget deal to raise the nation’s debt limit.
The Congressional Budget Office estimates that $30 billion of pandemic-related spending could be canceled. That’s just a tiny fraction of the $4.6 trillion authorized under a series of pandemic relief laws enacted under Presidents Donald Trump and Joe Biden.
What’s in jeopardy is the COVID relief money that hasn’t yet been committed — or obligated in government parlance — to specific recipients. House Republicans voted last month to rescind those funds as part of their debt limit bill, which has served as their starting point for talks with the White House.
The potential cuts would spare one of the more prominent portions of the 2021 American Rescue Plan. That’s because the Treasury Department already has distributed nearly all of the $350 billion of flexible aid for states, territories and local governments.
Several smaller programs contained in that same law — including one that helps schools and libraries connect people to the internet — could lose funds that have not yet been committed to particular projects.
COVID RELIEF LAWS
Republican debt-limit proposals to trim federal spending target six coronavirus relief laws passed by Congress in 2020 and 2021. Collectively, those laws provided about $4.6 trillion for pandemic response and recovery efforts. Some of that went to things directly associated with the virus outbreak, such as vaccines, COVID-19 test kits, public health expenses and stockpiles of masks and other personal protective equipment.
Other funds went to offset the economic and social effects of the pandemic, including aid to the unemployed and homeless and assistance for schools that had to shift to online instruction or take extra classroom precautions. Still other funds were designated for state and local governments to offset their lost revenues or finance programs, services and projects.
With the expiration of the nation’s public health emergency, Republicans contend it’s time to claw back leftover pandemic-era funds. Biden appears likely to go along with that.
“If the money was authorized to fight the pandemic but was not spent during the pandemic, it should not be spent after the pandemic is over,” House Speaker Kevin McCarthy said while introducing the GOP’s debt-limit package last month.
HOW MUCH IS AT STAKE
The Congressional Budget Office estimates that halting the use of unobligated pandemic relief funds would result in a net spending reduction of $30 billion over the next decade.
The CBO said much of the reduction could come from public health, infrastructure, rental assistance, community development and disaster relief programs. But it did not provide estimates of how much could be lost for specific programs.
Democrats on the House Appropriations Committee provided their own estimates of pandemic relief funds that could be cut, including billions of unobligated dollars for vaccines, health care providers and public health initiatives.
One program that could face cuts is the Emergency Communications Fund run by the Federal Communications Commission. The nearly $7.2 billion program provides money for schools and libraries to buy laptop or tablet computers, wi-fi hotspots, modems, routers and broadband connection services for use by students, school staff and library patrons.
Data provided by the FCC indicates that about $6.7 billion had been committed to projects as of May. If the remaining funds are pulled back, additional applications might not be approved.
STATE AND LOCAL GOVERNMENTS
Some local government officials initially had concerns that debt-limit spending cuts could claw back billions of unspent dollars authorized under the American Rescue Plan. Governments of all sizes — from the tiniest villages to largest states — got a share of $350 billion to use as they choose for dozens of potential purposes, including to cover public health costs, plug budget holes or finance water, sewer and high-speed internet projects.
Treasury Department rules require recipients to obligate those funds for particular purposes by the end of 2024 and to spend the money by the end of 2026.
Though the Treasury has already distributed the money, many state and local officials are still deciding what to do with it.
States and territories had obligated $111 billion of their total $200 billion as of the end of 2022, according to an Associated Press analysis of the most recent data available from the Treasury. Counties and cities that received at least $10 million had obligated about 45% of their cumulative $100 billion as of the end of last year, the AP found. Similar data was not available for smaller local governments.
The National League of Cities warned last month that rescinding unobligated funds could jeopardize local investments in public safety, infrastructure and other community priorities. But legislative director Mike Gleeson said the league no longer has concerns, because federal officials confirmed that funds already distributed by the Treasury cannot be taken back.
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