Cities and states are pushing back against a Republican debt-limit and spending cuts bill recapturing unspent pandemic funds that’s on track for a House vote as soon as next week.
House Speaker Kevin McCarthy, R-Calif., Wednesday unveiled the 320-page “Limit, Save, Grow Act of 2023,” with a plan to bring the bill to the Rules Committee on Tuesday, with a floor vote later next week. It’s the latest salvo in the partisan debate over lifting the $31.4 trillion debt ceiling to avoid a default that could come as early as June. The GOP’s measure, which has little chance of passing the Senate, is intended to force Democrats off their position insisting on a clean debt limit bill.
“Now that we’ve introduced a clear plan for a responsible debt limit increase, they have no excuse to refuse to negotiate,” McCarthy said Wednesday.
The bill would lift the debt limit by $1.5 trillion or suspend it through March, 2024. McCarthy said it would save $4.5 trillion by holding fiscal 2024 discretionary spending flat to 2022 levels and cap spending at 1% annually for the next decade. The bill would also repeal clean energy credits passed as part of the 2022 Inflation Reduction Act that Republicans say together cost as much as $1.2 trillion.
For cities and states, the biggest threat is the proposal to recoup up to $70 billion of unspent funds from the American Rescue Plan Act of 2021. The bill “rescinds all unobligated balances of amounts appropriated or otherwise made available” by ARPA and other pandemic laws, according to the text.
Congress passed six pandemic relief bills in 2020 and 2021 that provided about $4.6 billion in funding. As of Jan. 31, 2023, the federal government had obligated a total of $4.5 trillion and spent $4.2 trillion, according to the Government Accountability Office. Of the $350 billion Coronavirus State and Local Fiscal Recovery Funds program, which is the main pandemic program for state and local governments, roughly $349.9 billion has been obligated and $349.7 billion spent, according to the GAO. The $69.5 billion Transit Infrastructure Grant program had only $53.2 billion spent by the end of the January.
The National League of Cities urged lawmakers to talk with local officials to understand how the move would hurt local governments.
“The premature claw back of these funds would jeopardize millions of dollars in local investments in public safety, infrastructure, and other top community priorities,” NLC CEO and Executive Director Clarence Anthony said in a statement. The funds “have been a lifeline to our nation’s communities.”
The National Conference of State Legislatures noted that Congress as recently as December approved the use of the SLFRF funds for broader purposes as part of a final 2023 spending bill.
“The Department of the Treasury is still working on providing interim rules governing how these funds may be spent under the increased flexibility. Accordingly, states have not yet acted and are reluctant to apply for funding until there is clarity,” the NCSL said.
The spending bill also provided a “much-needed extension” for spending the SLRF funds to September 30, 2026, the group said. “NCSL urges against the transfer of unobligated funds before states can use this increased flexibility and put forward smartly developed proposals.”
An attempt in March 2022 to claw back unspent pandemic funds sent to the states under former House Speaker Nancy Pelosi sparked a revolt by several Democrat governors.
On Thursday, Senate Majority Leader Chuck Schumer, D-N.Y., called the Republican bill a “MAGA wish list” that has “no chance of moving forward in the Senate.”