April 19th, 2020 by WCBC Radio
U.S. Senators Chris Van Hollen (D-Md.), Elizabeth Warren (D-Mass), Chuck Schumer (D-N.Y.), and Sherrod Brown (D-Ohio) have sent a letter to Federal Reserve (Fed) Chairman Jerome Powell expressing serious concern with the arbitrary population thresholds used to determine eligibility for cities and counties to receive relief under the newly created Municipal Liquidity Facility program. The Senators urged Chairman Powell to expand eligibility for the program, which was authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act and allows the Fed to purchase up to $500 billion of debt from eligible entities. As noted in their letter, under the current requirements laid out by the Fed, the program will only directly benefit 15 counties and 10 cities across the United States.
The Senators wrote, “Cities and counties across the country are in desperate financial straits and need assistance from Congress and the Federal Reserve, and the Federal Reserve’s announcement last week that it would be purchasing up to $500 billion of debt from eligible cities and counties was welcome news. But by limiting the direct purchase of short-term notes to cities with at least one million residents and to counties with at least two million residents, the Federal Reserve’s program will benefit only 15 counties and 10 cities, leaving out much of the country, including some of the hardest-hit communities.”
In their letter, the senators urged Chairman Powell to revise the terms of the program to allow more cities and counties to participate, noting, “the population limitation is arbitrary and unacceptable and will hurt hundreds of communities nationwide.” They point to examples throughout their states including Baltimore, Maryland; Boston, Massachusetts; Toledo, Ohio; and Westchester County, New York, all of which will not receive direct funding from the current program.
The Senators also stress, “Congress intended for the law to channel badly needed resources to state and local governments that are fighting on the front lines of the coronavirus pandemic while grappling with a historic economic slowdown and billions of dollars in lost revenue.” The Members add that, without this support, these governments will be forced to cut services or raise taxes – both of which can harm public health and the economy when they are most vulnerable.
As the Senators mention in their letter, the COVID-19 pandemic has caused significant revenue shortfalls and has also increased costs for local governments, with a National League of Cities report finding that more than 2,100 cities are planning for major budget shortfalls this year as a result of the unexpected increase in expenditures and loss in revenue. These communities, which will need to scale back projects and services to focus on curbing the spread of the virus, need the expeditious support of the federal government to fill these short and long-term gaps in funding.
The letter was also signed by Senators Jeanne Shaheen (D-N.H.), Tammy Baldwin (D-Wis.), and Kyrsten Sinema (D-Ariz.).
The full text of the letter is available here
