Payson, Star Valley and Gila County may all collect welcome windfalls if the state follows through on a promise to distribute federal money intended to help local jurisdictions weather the pandemic.
Gila County is scheduled to get $3 million, with Payson in line for $1.8 million and Star Valley for $265,000. The formula for the distribution works out to $114 per resident, with only people living in unincorporated areas counting toward the county’s share.
The $2 trillion CARES Act earmarked $1.9 billion for Arizona — which includes health and public safety assistance for cities and counties. However, the federal CARES Act also gave governors broad authority of the distribution of that money up to the state.
Gov. Doug Ducey has withheld most of the money from counties and cities, arguing the state may need it more than the cities. However, soon after Pinal County threatened to sue to force the release of money, the state agreed to distribute $441 million.
The wrangle over distribution of the federal funds comes as U.S. jobless claims pass 40 million and congressional movement toward another stimulus package stalls. The House passed a second, $3 trillion COVID-19 stimulus measure that included nearly $1 trillion to help states, counties and cities. However, Senate leaders have refused to consider the measure, saying it’s too costly and that the government should wait to assess the impact of the first bailout — which largely expires in July.
Local town and county officials did not return requests for comments prior to press time on whether they’ve received the promised state money or know how they might spend the windfall.
Local governments have predicted a financial blow from the two months of shutdowns and increased costs for testing and public health responses.
Cities and counties statewide rely heavily on the sales tax, which has taken a big hit in the last two months. Nationally, retail sales dropped 16% in April. The state has not released figures for May — but economists expect another big drop.
During the 2008 recession, state and local revenues dropped by about a third most times, due to the reliance on the sales tax.
However, Star Valley has no town sales tax and went into the pandemic with comfortable budget reserves.
Payson relies heavily on sales tax and will likely suffer sizable losses because of revenue drops in hotels and restaurants during the closure. However, other businesses like hardware stores and grocery stores may have actually gained sales during the closures.
The sales tax provides more than half of Payson’s general fund budget. Town officials imposed a hiring freeze and canceled most capital projects, trying to anticipate a drop in revenue.
Payson Chief Financial Officer Deborah Barber at a recent town council meeting said so far the shutdowns have had less impact than she originally feared and the hiring freeze and capital spending delays may enable the town to limp through to the end of the fiscal year in June without major cuts or layoffs.
However, the town has not posted the March or April sales tax and financial status report on its website and town officials did not return requests for estimates on sales tax trends prior to press time.
The CARES Act formulas created clear winners and losers — with rural counties generally left on the sidelines. For instance, the state’s largest cities — Phoenix, Tucson and Mesa — got their own distribution — generally far more generous than the pass-along formula from the state.
That prompted Pinal County to sue, seeking a more equitable formula. Pinal County will get $27 million — less than half the per capita payment received by Maricopa County, according to a report by Howard Fischer, with Capitol Media Services.
Ducey at a press conference this week said he will hold on to the bulk of the money until the impact of the closures on the state budget becomes clear.
He noted that 600,000 Arizona residents have applied for unemployment since the pandemic hit, boosting the unemployment rate to somewhere between 15% and 20%. The rush of claims could exhaust the state’s unemployment trust fund, despite federal assistance in paying enhanced unemployment benefits. The CARES Act money could provide a bailout, said Ducey.
The CARES Act included a $600 per week boost in the maximum unemployment benefit, compared to the state’s normal $240. The federal funding also provided coverage for part-time and self-employed workers who lost income due to the pandemic. The Arizona unemployment system couldn’t handle the load and the state hired an outside contractor to process the claims from the part-timers and self-employed. The enhanced federal benefits expire in July, unless Congress acts to extend them.
The Arizona Legislature also adopted a relatively optimistic “skinny budget” before adjourning. The slimmed down budget put most new spending programs on hold. State finance experts still don’t know how hard the rise in unemployment and the drop in sales will impact the state’s $11 billion budget. The Joint Legislative Budget Committee calculates that the previously projected $1 billion surplus could turn into a $1 billion deficit.
Nationally, an additional 2.1 million people filed for employment last week, bringing the 10-week total to 40.8 million. The nation may be approaching the historic, 24% jobless rate hit at the peak of the Great Depression — although the numbers may decline now that all 50 states have reopened to some degree. The number of new claims dropped by more than one-third from the 6.9 million in new weekly claims several weeks ago. The 41 million total may include some double counting — but doesn’t include many part-timers or millions of undocumented workers, who aren’t eligible for unemployment.
Some states like Arizona, Florida and Texas have rules that limit eligibility for many workers — like part-time, gig, and self-employed workers. Some 10 million people nationally in those categories have filed for benefits. Most of those workers in Arizona still aren’t getting benefits due to state processing delays.
The House approved a second, $3 trillion relief package that would have extended the enhanced unemployment benefits as well as a host of other priorities.
Arizona Republican Rep. Paul Gosar, who represents Rim Country, opposed the added spending.
The House package would have extended unemployment benefits, added more money to help small businesses and provided billions in added help for states, counties and cities. The bill would have also included another direct payment to taxpayers, whether or not they suffered income losses from the pandemic.
Republicans balked, saying the package was too sweeping and costly and that it included a lot of money for things not clearly related to the costs of the pandemic.