Democratic state treasurers warn against repurposing COVID-19 funds for infrastructure

Democratic state treasurers are warning Congress against a GOP pitch to repurpose funds from President Biden’s $1.9 trillion coronavirus relief law to pay for infrastructure investments. 

In an open letter to lawmakers Thursday, 14 Democratic state treasurers argued that taking funds from the COVID-19 relief measure would imperil the economic recovery. 

“These investments are already getting shots in arms and protecting the jobs of teachers, firefighters, health care workers, and law enforcement. They will ensure not only recovery from the losses of the pandemic, but actually help reach pre-pandemic forecasts of economic growth,” the state treasurers wrote in the letter, which was spearheaded by Invest in America Action, an advocacy group pushing for a robust infrastructure package.

“Now that the road to recovery is clear, some members of Congress are considering clawing back these vital funds to pay for other priorities,” the letter continued. “As State Treasurers and guardians of our states’ fiscal health, we urge Congress to resist calls to raid Covid relief funding. The risks are too great and will cause a longer, more difficult economic recovery for everyone.”

Invest in America released the letter just hours after a group of Republican senators floated paying for an infrastructure package in part by taking unused funds from previous COVID-19 relief packages. In a memo sent to the White House, Republicans led by Sen. Shelley Moore Capito (W.Va.) proposed offsetting the costs of their $928 billion counterproposal with a combination of unspent coronavirus relief funds, user fees and infrastructure financing. 

“We believe that repurposing these funds needs to be a really important part of how we fill this gap,” Sen. Pat Toomey (R-Pa.) said at a news conference Thursday morning, citing some $700 billion from the $1.9 trillion American Rescue Plan that would not be spent in the current fiscal year but at some point after Oct. 1, when the next fiscal year begins.

Larry Summers, a former Obama economic adviser and Treasury secretary during the Clinton administration who has raised concerns about Biden’s spending plans, suggested in a Washington Post op-ed this week that infrastructure plans could be financed through the “reprogramming of Rescue Plan funds, such as those now being used by some states to finance tax cuts.”

White House principal deputy press secretary Karine Jean-Pierre on Wednesday rejected the notion that there are “hundreds of billions of dollars in COVID-19 relief funds available to repurpose” and signaled that the administration was not open to the idea. She said the rescue package is working “exactly as needed” by delivering relief to businesses and communities, helping end the pandemic and bring about a strong recovery.

Thursday’s letter was signed by the treasurers of California, Colorado, Connecticut, Delaware, Illinois, Kansas, Maryland, Massachusetts, Nevada, New Mexico, Oregon, Vermont, Washington and Wisconsin.

The treasurers described the COVID-19 funds as vital to returning cities and towns to full fiscal health, arguing that the $800 billion recovery act passed under former President Obama during the Great Recession did not include enough state and local assistance, leading to an overall sluggish recovery for the U.S. economy. 

“Repurposing covid relief funding would result in a massive loss of revenue for large and small communities alike, at precisely the moment they need to be doing everything to get our economy going again,” the letter said.

The coronavirus relief plan passed by Congress earlier this year, without any Republican support, included $350 billion in assistance to state and local governments. The administration started allocating those funds earlier this month. 

Wisconsin State Treasurer Sarah Godlewski, one of the signatories, described the Republican proposal to use unspent coronavirus funds for infrastructure as “nothing short of highway robbery.”

“Working in a bipartisan fashion with Wisconsin’s 72 county treasurers, I’ve seen firsthand that local governments were already making steep cuts to keep basic, essential services running – and now Senate Republicans want to rip away their relief,” Godlewski said in a statement to The Hill.

The White House has been negotiating with a group of Republicans led by Capito on a potential bipartisan package for several weeks. The GOP lawmakers raised their counteroffer to $928 billion on Thursday but it still remains significantly below the $1.7 trillion offer made by the White House last week. Biden’s initial infrastructure plan would cost about $2.3 trillion.

Biden has proposed paying for the spending package by raising the corporate tax rate from 21 percent to 28 percent, a move Republicans oppose because it would roll back much of the 2017 tax cuts imposed under former President Trump.

The White House has come out against paying for a package through user fees, which it says would break Biden’s promise to not raise taxes on Americans making less than $400,000 a year.