Two U.S. senators will introduce a proposal that would provide billions of dollars in aid to help state and local governments shore up budgets amid tax revenue losses caused by the COVID-19 pandemic.
The proposal, announced April 19 by Sens. Robert Menendez, D-N.J., and Bill Cassidy, R-La., would set up a $500 billion fund to help state and local governments maintain essential services while responding to the pandemic.
The announcement follows a call from the nation's governors for $500 billion in federal aid to help states stabilize budgets amid the ongoing public health crisis.
During an April 20 conference call, Cassidy explained that the legislation is designed to help state and local governments — whose tax bases have “been destroyed” — provide essential services necessary for their tax bases to be restored.
The senators said the aid would be provided in three tranches of $166.6 billion each, using a new formula designed to provide aid to parts of the country with the most need.
The first tranche would be based on population size, using the same formula used to allocate the $150 billion stabilization fund created under the Coronavirus Aid, Relief, and Economic Security Act.
The second would be based on infection rates. And the third would be based on revenue losses in proportion to the combined revenue loss of all the states from February 1, 2020, through December 31, 2020.
"States that took aggressive actions to curb the spread of the coronavirus should not be facing additional budget shortfalls as a result of taking responsible actions," Menendez said.
The governments would be given full flexibility in using the revenue. “This is priming the pump for economic recovery,” Cassidy said.
The lawmakers said the legislation will be introduced when the Senate resumes more normal meetings than the pro-forma sessions of recent weeks. An aide to Menendez said that at present the Senate is planning to reconvene May 4 but the date is subject to change because of the pandemic.
According to Cassidy, the next COVID-19 relief bill, which could be voted on as early as this week, will not include aid for state and local governments.
Menendez said the upcoming relief package is focused on businesses, hospitals, and testing. “We think this is well poised for what I believe will be a Covid 4 [package],” he said.