On a per capita basis, smaller cities and counties in Arizona are getting about two-thirds of the relief funding from the CARES Act as their larger counterparts in the state. That has led some in the state to cry foul, while others have expressed appreciation at the flexibility that the plan from Gov. Doug Ducey’s office provides.
Included in the $2 trillion CARES Act signed into law by President Donald Trump on March 27 was additional relief funding for state and local governments. The U.S. Treasury provided direct payments to all cities and counties with a population over 500,000 and gave the rest of the money to the state to distribute. In Arizona, Phoenix, Tucson, and Mesa were the only three cities to receive payment from the federal government along with Maricopa and Pima counties.
All three of Arizona’s large cities were paid $174 per capita by the U.S. Treasury based on 2019 census information. But when Gov. Ducey’s office announced the state’s plans to distribute the rest of the money to smaller cities and counties, it amounted to $114 per capita.
“It is true that there is a discrepancy in what local governments received,” said Nick Ponder, Legislative Director of the Arizona League of Cities and Towns. “Much of that can be attributed to the way the law was written at the federal level. They did not account for the different makeup of all states and there wasn’t a national per capita formula, so there will always be inequities. The 88 cities and towns in Arizona who received less ($114 per capita vs $174 per capita) would certainly welcome additional dollars so that they could put those dollars to work in their community, that said we think it should be applauded that this state is one of the earliest and the most flexible in making distributions to all local governments.”
Ponder said the money being distributed through AZCARES gives cities more options to use it than the money provided to larger cities by the federal government.
“There is something to be said for flexibility and the creative process employed by the governor’s office,” he said.
In Lake Havasu City the AZCARES money works out to about $6.4 million, but the city would have received more than $9.7 million if it were paid at the same per capita rates as the large cities. But Lake Havasu City Mayor Cal Sheehy said he doesn’t feel like the smaller cities got shortchanged in the deal.
“I’m grateful to Gov. Ducey for bringing certainty to cities and towns across Arizona,” Sheehy said. “Although our funding from the Governor’s Office is less per person than direct funding to the communities with over 500,000 people, it still allows for flexibility should a specific need arise, and cities and towns across Arizona have a need for additional funding. I believe that Gov. Ducey was prudent in the way that he calculated those funds and distributed them to cities and towns with an eye on, should a need arise in a specific community, there would still be funds available for that community from the governor’s office.”
Sheehy said the city already has several priorities for the money, mostly related to public safety. He said the city will decide exactly how to spend its share of the AZCARES Fund through a series of public hearings at City Council meetings in the coming months.
Mohave County has been promised $9.1 million from AZCARES but that figure would have been $13.9 million with a $174 per capita rate. Mohave County District 5 Supervisor Ron Gould said he hasn’t yet looked too deeply into how the CARES money was divvied up throughout the state.
“It should have been fair, I’ll have to do some research into how much money the state held onto rather than passing it on to the cities and counties,” Gould said.
The bigger issue for Gould, along with District 3 Supervisor Buster Johnson, isn’t with how the money from the CARES Act was distributed, but rather how much was passed out to governments in the first place. Both supervisors said Mohave County has been able to make use of federal grants to help boost the health department during the current crisis and the county itself has spent less than $100,000 on covid-19 related expenses.
“While it’s nice to get the money and you aren’t going to turn it back because they will just give it to somebody else, it still doesn’t seem like a good use of our taxpayer money,” Johnson said. “My problem with it is it is taxpayer money that they are sending out. At our board meeting we were discussing what we were going to do with the money and it really didn’t have anything to do with covid. That bothers me. I mean, we got $9.1 million for basically nothing.”
Johnson said the supervisors have earmarked about $2.5 million of the money for capital projects, with the rest likely to go into the contingency fund that the supervisors can decide how to spend at a later date.
Gould said that judging by the situation in Mohave County, the federal government is overpaying states and local governments by millions of dollars that it can’t really afford.
“They pushed all this money out to the states and bearing in mind that they have a $25 trillion deficit,” Gould said. “The national debt is huge and they don’t have the cash. So they are creating this money by expanding the money supply. My children and my grandchildren are going to be the ones saddled by this debt of irresponsibility.”
Gould said he would like to see the money in the county’s contingency fund used to help ease the financial burdens of the taxpayers.
“What I plan to do is to move that that money be put towards the inflation that we are going to see in property taxation,” Gould said. “If things go as they are laid out in the budget that I voted against you are going to see a $2 million property tax increase. I would like to see part of that money offset that increase so it goes back to the people that feel the burden of that fiscal irresponsibility.”
Divvying up the funds
Patrick Ptak, communications director for Ducey’s office, said the Governor’s Office spoke with many local leaders across the state, including Kingman Mayor Joan Miles in Mohave County. He said the goal of the plan is to prioritize flexibility and minimize red tape.
“The governor made it very, very simple,” Sheehy said. “There are some requirements that the governor has from the federal government and we have to work through those parameters, but from our perspective the way the governor’s office set this up is with minimal red tape. It is seamless so far, and we look forward to having those funds in our accounts.”
In addition to making the money relatively easy for local governments to obtain, Ptak said the plan also allows those cities and counties flexibility to determine how to spend the influx of cash.
“We are making funding immediately available and up front,” Ptak said. “The way we do that is the funding we are providing directly to cities and counties will be used for the purposes of public health and public safety – things like law enforcement, emergency payroll, and stuff like that. We know that those are eligible costs under the federal requirements for these dollars. So what it does, is it allows local jurisdictions to free up whatever dollars they are putting towards those purposes to use as they see fit.”
Ptak also pointed out that Arizona has distributed the highest percentage of federal dollars to local governments of any state that it has been able to gather data from. In all, nearly $1.4 billion of the $2.8 billion earmarked for Arizona in CARES has gone to cities and counties – 49.82 percent of the total. A little less than $1 billion of those payments were to large population areas from the federal government with about $441,000 going to smaller governments through AZCARES.
Ptak said the CARES Act guidelines indicate that local governments should receive about 45 percent of the money with the other 55 percent going to each state. Arizona has split up the money nearly 50-50.
“We looked closely at how other states are doing it and the guidance from the federal government,” Ptak said. “We followed the same methodology in providing payments to cities and counties that did not receive a direct allocation as the U.S. Treasury.”
Ptak said the method used 2019 census data to divvy up the total amount of money, multiplied by 0.45 to account for the percentage meant for local governments. Ptak said the different per capita payment amounts stems from the fact that the U.S. Treasury used the states total $2.8 billion in relief funds to calculate the payments to the largest cities and counties while The State of Arizona used the $1.8 billion it was given to determine the shares for smaller cities.
Although Arizona has decided to distribute $441,000 to its small cities and counties, most of the rest of the money is still unspoken for.
The Governor’s Office has announced that it is setting aside $150 million for the Arizona Express Pay Program which will provide fast loans to entities such as local governments, tribes, nonprofits, school districts, fire districts and more who apply for relief funds from the Federal Emergency Management Agency. Ptak said grants from FEMA can take months to arrive, so the program is designed to give the organization cash upfront to be paid back once the FEMA money is paid out.
That still leaves about $1.2 billion in CARES money that the state has available. Ptak said Arizona is keeping an eye on several potential trouble spots before it decides how the state will spend its share. He mentioned a projected $1 billion budget shortfall by the end of next fiscal year, social safety net programs that are being strained during the pandemic, Medicaid, and potential problems with the State Unemployment Insurance Trust Fund.
“We know that we only get to use them once, and we want to make sure that we are being wise in doing so,” Ptak said. “As we know more about the state’s budget picture, as more data comes in over the year and we know what the extent of some the economic fallout is we will be able to make more informed decisions about where those dollars should be used.”