U.S. stimulus to rain $24B on NY governments. What they're getting, and what they'll do with it

Local governments feared financial disaster because of COVID-19. Instead, they received a windfall.

Mark Lungariello
Rockland/Westchester Journal News

New York governments braced for financial disaster when the coronavirus hit – but a year later they’re set for a massive injection of federal stimulus money.

The $1.9 trillion American Rescue Plan came with $12.6 billion in relief for New York state government and another $10.8 billion that will go directly to counties and local municipalities.

It is an unprecedented windfall for municipalities to try to close budget gaps and find ways to revive their local economies amid the COVID-19 pandemic.

Local officials will have broad discretion on how to spend the money, which can be used to cover revenue losses from the pandemic or to provide aid to industries like tourism and travel.

"I think the word unprecedented is the correct one," said Jonas Shaenda, chief economist at the Fiscal Policy Institute, a union-backed think tank in New York.

“The depth of the fall I think is quite remarkable, and it’s something we’ve never seen before. There is a lot of damage that needs to be addressed."

A million New York jobs were lost in 2020 due to the pandemic, representing some 10% of the statewide workforce. Unemployment shot up from 3.8% in early 2020 to 8.7% by year's end.

The aid will come to New York state government as it works to close a $15 billion budget gap for the upcoming fiscal year that starts Thursday. The sides might still raise taxes to close the remaining deficit. 

In New York City alone, there was a reported $1.5 billion revenue decline and $5.9 billion in unexpected expenses due to the pandemic.

Dutchess County Executive Marc Molinaro said making the money available directly to counties and local governments prevented officials from having to “jump through hoops” to apply through a grant program run by the state.

Now municipalities are figuring out how it will spend the money.

“Obviously, I’m very happy about” the funding, said Dan Mandell, the mayor of Elmira, which is getting about $31 million in federal aid; the city's whole budget is about $39 million.

“We just have to find out what the exact parameters are."

More:Stimulus checks, child care help: What's in the federal package for New Yorkers

Local governments assess impact of federal aid

Dutchess County Executive Marc Molinaro is among the Republicans who could challenge New York's governor next year.

The first two rounds of stimulus packages by Congress omitted direct aid to state and local governments, with some Republicans in particular arguing against it.

But when Democrats took the control in Washington this year, they included $350 billion nationwide for municipalities and state governments, as well as billions more for schools, in the stimulus package approved March 10.

Senate Majority Leader Chuck Schumer said earlier this month it was critical to ensure part of the aid went directly to local governments.

"I made sure that it didn’t go all to the state, because when it goes to the state, the localities often don’t see it," Schumer told the USA TODAY Network New York after the bill passed.

Dutchess County, which will pull in $57 million, offered an early retirement incentive and furloughs last year as part of almost $18 million worth of cuts in its $500 million budget, Molinaro said.

“All of the core services that residents expect, certainly in an emergency in a difficult time, county governments deliver,” Molinaro said during a COVID-19 roundtable earlier this month hosted by Rep. Sean Patrick Maloney, D-Cold Spring, Putnam County.

“So this aid will allow us to reestablish that infrastructure and really again begin to rebuild from our losses."

The latest stimulus offers governments of all size in the state the type of infusion most rarely have seen, steadying shaky budgets and offering the possibility of governments taking on construction projects — from a new sidewalk to all new broadband infrastructure.

Shaenda said direct aid to governments, alongside other recovery spending, is not only a stopgap measure to keep people working but should create new opportunities to grow the state economy through infrastructure projects.

“This is where the public spending comes in to backstop the kind of a sliding economy so of course this is a situation it’s very difficult to overdo what needs to be done," he said.

Binghamton Mayor Richard David said the $48.3 million the city is getting is a “once-in-a-lifetime” opportunity.

"The stimulus money can be used to offset your revenue losses and make your budget whole,” David said.

In Rochester, Mayor Lovely Warren is working to close a $31.4 million gap before presenting her budget proposal in mid-May, but the city has yet to detail how it would use the $207 million from the stimulus to plug the gap and make other spending priorities.

Monroe County has been hit by the drop in sales tax collections. So it is deciding how to prioritize $144 million from the stimulus package.

More:Will New York raise taxes on the rich? Why Cuomo says it's not needed

New aid, new debates

Senate Majority Leader Chuck Schumer, D-N.Y., leaves the chamber just after the Senate narrowly approved a $1.9 trillion COVID-19 relief bill, at the Capitol in Washington, Saturday, March 6, 2021.

The relief comes on the heels of other COVID-19 relief packages from the federal government in 2020 that were much more restrictive about who received direct aid. The CARES Act last year earmarked $150 million to states and municipalities with populations of over 500,000.

Westchester County, the early pandemic epicenter in New York, was one of seven municipalities in the state that received direct aid from that plan.

With a $168 million boost the county had enough cash that it paid for meals for correction officers and funded a high school graduation in the parking lot of Playland, a county-owned amusement park closed due to the virus.

Westchester ended the year with a 2% reduction in property taxes and a projected $88 million surplus, due in large part to the aid.

The county is in line for another $187 million, and County Executive George Latimer said Westchester is likely to use its money for continued emergency and health service expenses.

It also may offer grants as it did last year for small business to purchase items such as heat lamps for outdoor dining or plastic dividers in retail stores.

The influx of cash will more than cover states and local government’s pandemic-related losses, financial analyses said.

The Washington, D.C.-based Tax Foundation, a fiscally conservative group, said the stimulus was equal to 116 times the amount of declining revenues for all state governments.

Nationwide, the analysis said local municipalities were set to get $130 billion, even though they did better in the first three quarters of 2020 compared the first three quarters of 2019.

That's true of New York government: Revenues were about $5 billion better than expected as the economy has come back quicker than originally estimated.

The foundation called proposals to infuse cash to local governments “a solution in search of a problem.”

Gov. Andrew Cuomo and other political leaders have warned the money in many ways is a one-shot revenue source: Use to plug budget holes and you could end up with future gaps when the money dries up.

As a result, Robert Mujica said the state is eyeing "one-time resources to fund one-time expenses that are specifically related to COVID and part of the recovery."

More:Could $360B federal aid allow localities to do more than just recover from 2020 losses?

Local leaders support new money, and why wouldn't they?

White Plains are among cities to see a financial windfall from the federal stimulus package approved earlier this month

Municipal leaders said the stimulus will help maintain services and boost the economy as part of a widespread recovery. Tom Roach, mayor of White Plains, said he was expecting revenues to return to pre-pandemic levels quickly.

White Plains is a small city known as home to corporate office buildings and as a shopping and dining destination.

“We are a hub city and we punch above our weight in terms of economic impact so we employ a ton of people,” Roach said. “And we are a place for people to celebrate and have a good time and I think there’s going to be a lot of that unleashed as the vaccinations continue.”

Senate Democrats passed the most recent stimulus without one vote from Republicans. Schumer said he had made municipal relief a priority.

“After fighting this pandemic on the frontlines, New York’s counties and municipalities were loud and clear: they needed help and they needed it now to keep frontline workers on the job and prevent brutal service cuts,” Schumer said in a statement.

During his roundtable discussion, Maloney pushed back on the criticism that the money is a bailout from Democrats.

“This isn’t like it’s going to a Democratic, blue state, even in New York,” he said. “Forty percent of the resources helping local government are going not to the state but to the locals, often controlled by Republicans.”

The funding can be used for sewer, broadband and other infrastructure work, but some government leaders said they’d use the funds just to steady their budgets.

“We still have a lot of work to do that we normally do as county executives,” Orange County Executive Steve Neuhaus, a Republican, said during the roundtable. “We run social services and all these different programs that have not gone away.”

There remains some confusion on one aspect of the stimulus, and that’s the amounts going directly to villages.

Paul Feiner, the supervisor of Greenburgh, a Westchester town that has six villages within it, said less than $5 million of the $10 million it is getting would go to the town with the remaining earmarked for the villages.

“It would have been easier if the federal government had given the money directly to the villages but again, we’re definitely grateful for this and appreciative and it’s going to be a big help,” Feiner said.

More:Protesters arrested in front of Andrew Cuomo's New York City office

Mark Lungariello covers government and politics. Follow him on Facebook @lungariello and Twitter @marklungariello

Includes reporting by Democrat and Chronicle staff writer Brian Sharp and Press & Sun-Bulletin staff writer Jeff Smith.