On Feb. 25, I had the opportunity to participate in a meeting with Treasury Secretary Janet Yellen. Hosted by the National League of Cities (NLC), the secretary wanted to hear how COVID-19 impacted smaller cities and why the direct funding proposed in the American Rescue Plan was important to municipalities. Attendees included NLC leadership and six mayors from cities with populations less than 75,000, representing municipalities in Alaska, Georgia, Louisiana, Michigan, New Hampshire, North Carolina, and South Carolina.
The $1.9 trillion plan, proposed by the Biden administration and recently passed in the U.S. House of Representatives, contains $350 billion for state, local, tribal and territorial governments. If nothing changes in the Senate, $65 billion of the $350 billion will go directly to all municipalities. Should that happen, it will be the first time that all 19,000 U.S. cities, towns and villages will receive direct emergency federal aid.
While the reasons varied from one city to another, it became clear in the meeting that direct funding was critical to offset COVID-19 related lost revenue and prevent municipalities from taking actions that would negatively impact their communities. Here in Claremont, direct funding would offset state or local revenue losses, prevent tax rate increases and enable the city to move forward on infrastructure improvements.
As Gov. Sununu announced at his budget address, there was a shortfall of about $50 million going into this budgetary season. What changes the Legislature will make to the governor’s proposed budget have yet to be determined, but there is concern that state revenue losses will be shifted to municipalities. This, coupled with declines in some local revenue streams, will have negative consequences. To make up for those revenue losses, municipalities might have to cut personnel, reduce services, raise taxes or a combination thereof.
Reductions of some state revenues and cost downshifting to municipalities over the years has cost municipalities millions of dollars and placed a heavier burden on the local taxpayer. Because Claremont’s median household income is approximately $30,000 less than the state’s median household income and our poverty rate is nearly double that of the state’s, the ability of our local taxpayer to make up revenue losses due to COVID-19 is severely hampered.
At our last meeting, the city council recognized this when it cited stabilizing the tax rate as one of its priorities. To assist City Manager Ed Morris in drafting his budget proposal, the council stated that it wanted to see a level funded budget for the next fiscal year. Consequently, any state or local revenue losses or downshifted costs would not be shifted to the local taxpayer. Instead, other actions would have to be taken such as personnel cuts, a reduction in services or further delays in infrastructure improvements. None of which are desirable given Claremont’s budget is already conservative, city positions remain vacant and the capital improvement plan consists of $50 million in delayed infrastructure projects.
Hence, the importance of direct federal funding, all of which I relayed to the Secretary. Should the Senate pass the Rescue Plan as is, Claremont is projected to receive between $2.3 million and $2.8 million. Such funding will give the city the resources it needs to offset the losses experienced due to COVID-19 without taking measures that would negatively impact the community and its ability to move beyond the ongoing novel coronavirus pandemic.
Charlene Lovett is the mayor of Claremont and a 22-year Army veteran. She welcomes your feedback. Please email questions, comments or concerns to her at [email protected].