The $2 trillion federal rescue package passed last month by Congress doesn’t just help workers and businesses. It also contains lots of money for state and local governments.
Alabama officials said they expect up to $1.9 billion from the Coronavirus Aid, Relief, and. Economic Security (CARES) Act.
A majority of those funds will go to the state government to make up for lost tax revenue. Some 45 percent will go to cities and counties Local jurisdictions with more than 500,000 residents will apply directly to the federal government for aid. In Alabama, that applies only to Jefferson County.
That leaves about $750 million for the rest of county and municipal governments, according to Chickasaw City Councilman Adam Bourne, who serves on a 10-member committee appointed by the Alabama League of Municipalities to lobby Gov. Kay Ivey on the issue.
“Seven hundred and fifty million sounds like a lot, but you’re dealing with well over 400 cities and towns and Alabama, and of course 67 counties,” he told FOX10 News. “And all those entities to one extent or another will be affected negatively by the virus and the response to the virus.”
State Finance Director Kelly Butler told FOX10 News in a written statement that the federal law restricts the funds to expenditures directly related to the novel coronavirus outbreak.
“We are awaiting guidance from the U.S. Treasury on implementation of the CAREs Act,” he stated. “No money has been granted to states and local governments from this Fund, and we are not expecting to have final guidance from the U.S. Treasury Department until later this month.”
Bourne said it is difficult to estimate the economic impact on municipal budgets because no one knows how long the disruption will last. Based on the hit local governments took following the 2008 financial collapse, Bourne said, cities could lose 15 percent to 20 percent of their revenue.
“Of course, the hard part is this particular situation is so unprecedented that they won’t have a very clear picture at all until sales tax comes in from this time that we’re facing now,” he said, adding that the numbers will not become clear for about 60 days because of the collection cycle.
Bourne said he wants to use his position on the League of Municipalities coronavirus task force to make sure cities like his get treated fairly when the state divvies up the money.
Many cities get most of their revenue from sales taxes. But using a formula that takes only that into consideration would shortchange cities like Chickasaw that do not have a large retail sales base, Bourne said.
He noted that Chickasaw is a largely industrial town that derives roughly as much revenue from business license fees as sales taxes. And that, he added, is something will not show up for months as companies renew their licenses.
Those license fees are based on companies’ gross revenues, which almost surely will decline this year, Bourne said.
“That’s one thing that I would like to bring attention to at the state level, is that you have a lot of cities out there in a similar situation that might have a heavy industrial base,” he said. “In those situations, we have to be understanding that the impact of this won’t be fully felt until then until the beginning of next year.”