States have billions of federal COVID relief aid to spend. Some haven’t spent a dollar

Bryan Lowry and Jeanne Kuang
McClatchy Washington Bureau (TNS)
The U.S. Treasury Department building in Washington, D.C. (Chuck Myers/TNS)

WASHINGTON — Eight states have yet to authorize spending any of the billions of dollars in federal aid they received under President Joe Biden’s COVID-19 relief plan earlier this year, according to a think tank analysis.

States have until 2024 to spend their portion of the $350 billion in federal aid distributed to state and local governments as part of Biden’s American Rescue Plan. The aid to states and local governments made up roughly a sixth of the $2 trillion relief package approved by Congress in March, one of Biden’s biggest legislative victories.

Many states have steered those funds toward replacing lost revenue or economic relief programs, but a handful of mostly Republican states will head into the new year without having spent a dollar from the program. The eight states cumulatively represent roughly $16.5 billion in unspent aid.

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GOP-controlled governments in Missouri, South Carolina, Georgia, Mississippi, Arkansas, Nebraska and South Dakota have yet to budget their funds, according to the Center on Budget and Policy Priorities, which has tracked state use of the federal aid.

Rhode Island, the only Democratic-controlled state yet to budget the funds, is expected to approve a plan in early January when its legislature reconvenes.

In contrast, Missouri Republican Gov. Mike Parson’s office told The Kansas City Star that he won’t fully lay out his plan for the funds until he delivers his annual State of the State address in January.

When Missouri received its first tranche of its $2.7 billion in federal aid in May as its legislative session was winding down, Parson said his administration would deliberate on long-term uses for the money to roll out the following year.

A White House official said the law gives states multiple years to spend the money by design.

“First, the State and Local Program was designed for short term and long-term recovery support, including helping localities as new variants of COVID-19 emerge. The law allows funds to be obligated through 2024,” a White House official told McClatchy in an email this month as the omicron variant began rapidly spreading throughout the country.

Policymakers in Missouri and other states that have been slow to spend the funds are expecting to use some of the money for one-time investments in infrastructure rather than short-term economic relief or COVID-19 response.

Parson has suggested spending $400 million toward increasing broadband access across the state. Another likely use is helping local governments make improvements on wastewater, stormwater and drinking water utilities, according to lawmakers.

Missouri state Rep. Doug Richey, an Excelsior Springs Republican who chairs a committee that will weigh spending proposals, said he expects another major expenditure to be a nearly $120 million overhaul of the state’s aging IT system. He said lawmakers want to avoid setting up programs that will require future obligations by the state.

“We’re looking at one-time appropriations,” he said.

South Carolina Republican Gov. Henry McMaster’s office pointed to the state’s legislature when asked about plans for the state’s roughly $2.5 billion in federal aid which remains unspent.

“The General Assembly is ultimately responsible for allocating the funds and they’re expected to do so when they come back for regular session in January,” Brian Symmes, a spokesman for the governor, said.

Lawmakers in South Carolina put plans to take up the issue this fall on hold to focus on 2022 redistricting.

A committee formed by McMaster recommended spending hundreds of millions of dollars on broadband internet expansion, rural water and sewer upgrades, widening an interstate highway, and expanding operations at the Port of Charleston. McMaster has also floated a proposal for a $124 million a workforce scholarship program.

South Dakota Republican Gov. Kristi Noem, seen as a potential presidential candidate in 2024, offered proposals for spending her state’s nearly $1 billion in aid in 2022 during a December budget speech.

“To the fullest extent that we can, we are going to put those funds to work for our state, to address our state’s most pressing needs, to make fiscally responsible, one-time expenditures that will not grow the government, but that will save our people money in the long run,” Noem said, suggesting child care grants and sewer projects as potential uses.

Congressional Republicans said in March that Biden and Democrats erred by approving another round of state aid before states had finished spending the COVID-19 aid distributed under the previous administration.

Sen. Roy Blunt, R-Mo., said the slow pace of his home state and others to spend the funds confirms that point months later.

“I said at the time that Democrats should hold off on passing additional funding legislation until we knew exactly what the unmet needs were and what was needed to address them. They didn’t do that, so it is not surprising that there is now much more money in the system than states are able to get out the door,” Blunt told McClatchy in a statement.

But Biden administration officials said the pace of spending reflects states’ budget processes rather than their needs.

“Many states and localities have legislative or other governmental processes that they must complete before deploying funds or signing contracts,” a spokesperson for the Treasury Department told McClatchy. “While this can lead to a delay, it importantly allows for the community to engage on the plans around these historic investments. “

This month, the Biden administration has made suggestions to states about how to use the unspent funds. For example, Biden directed the Treasury Department last week to clarify to states that they can use the funds to replace lead pipes in drinking water systems.

Education Secretary Miguel Cardona also issued a letter encouraging states to use the funds to help fill school staff shortages “to ensure that students have access to the teachers and other critical staff they need to support their success during this critical period.”

The Treasury spokesperson said that as of August, 45% of the funds had been budgeted by states and local governments based on documents submitted to the agency, but pointed to a more recent analysis from the Center on Budget and Policy Priorities that found it was closer to 70% by the end of October.

That report said 11 states had yet to spend their funds, but since its publication in November, three of those states have approved spending plans: North Carolina, North Dakota and West Virginia.

While several conservative-leaning states in the South and Midwest have been slow to spend the money, Ed Lazare, a senior fellow at the center and author of the report, said that other Republican-led states put the money to quick use, including Texas, which steered more than $7 billion of its $15.8 billion in federal aid toward shoring up its unemployment insurance trust fund.

“There are plenty of red states that are spending the money as well,” Lazare said.

— The State’s Joseph Bustos contributed to this report.