Negotiations Over Pandemic Relief Funds Intensify as Debt Limit Talks Begin
CAPITOL HILL: With the COVID-19 pandemic officially declared over, policymakers have turned their attention to the remaining coronavirus relief funds that were allocated for vaccines, public health initiatives, and other programs. Negotiators are now striving to reach a budget deal to raise the nation's debt limit, and as a consequence, approximately $30 billion of unobligated pandemic-related spending could be at risk of cancellation. This amount represents only a small fraction of the $4.6 trillion authorized under a series of pandemic relief laws enacted under Presidents Donald Trump and Joe Biden.
The unobligated COVID-19 relief funds primarily consist of money that has not been committed to specific recipients. House Republicans voted last month to rescind these funds as part of their debt limit bill, which serves as their starting point for negotiations with the White House. However, it is worth noting that the potential cuts would not affect one of the more prominent provisions of the 2021 American Rescue Plan. The Treasury Department has already distributed nearly all of the $350 billion in flexible aid intended for states, territories, and local governments.
The Republican debt-limit proposals aim to trim federal spending and target six coronavirus relief laws passed by Congress in 2020 and 2021. Collectively, these laws provided approximately $4.6 trillion for pandemic response and recovery efforts. A significant portion of the allocated funds was utilized for initiatives directly associated with the virus outbreak, such as vaccine distribution, COVID-19 test kits, public health expenses, and stockpiles of masks and other personal protective equipment.
According to the Congressional Budget Office, halting the use of unobligated pandemic relief funds would result in a net spending reduction of $30 billion over the next decade. Initially, there were concerns among local government officials that debt-limit spending cuts could jeopardize billions of unspent dollars authorized under the American Rescue Plan. Governments at all levels, ranging from small villages to large states, received a share of the $350 billion to allocate as they saw fit for various purposes, including public health costs, budget shortfalls, and infrastructure projects such as water, sewer, and high-speed internet.
The Treasury Department has established guidelines requiring recipients to obligate the funds for specific purposes by the end of 2024 and spend the money by the end of 2026. While the Treasury has already disbursed the funds, many state and local officials are still in the process of deciding how to allocate them. As of the end of 2022, states and territories had obligated $111 billion of their total $200 billion, according to an analysis by the Associated Press. For counties and cities that received at least $10 million, approximately 45% of their cumulative $100 billion had been obligated by the end of last year. Data for smaller local governments was not readily available.
Last month, the National League of Cities expressed concerns that rescinding unobligated funds could undermine local investments in public safety, infrastructure, and other community priorities. However, legislative director Mike Gleeson stated that the league is no longer worried since federal officials have confirmed that funds already distributed by the Treasury cannot be reclaimed.
As negotiations continue, policymakers will grapple with balancing the need to address the nation's debt limit with the importance of supporting ongoing recovery efforts and community investments. The fate of the unobligated COVID-19 relief funds remains uncertain, but it is clear that the outcome will have significant implications for the recipients and the long-term recovery from the pandemic.