Federal COVID-19 Funds Come at a High Price

The CARES Act is the largest economic stimulus package ever created in the history of the United States. The $2 trillion bill was passed by the Senate on March 25, passed in the House of Representatives on March 26, and signed into law on March 27. Part of the Act established the $150 billion Coronavirus Relief Fund to assist state, local, and tribal governments in mitigating the economic impact of COVID-19.

While the intentions behind the installment of such a relief fund were well meaning, the CARES Act provided states with little flexibility in terms of using their relief assistance. States were required only to use funds on costs directly related to the coronavirus. But many of the harms to states came from indirect effects of the pandemic. This led to wasteful spending as states created ways to spend as much of their relief assistance as possible, therefore preventing assistance from reaching citizens who needed it most.

The changes to Medicaid rules are perhaps the most egregious and costly portion of the CARES Act. According to a study by the Foundation for Government Accountability, Medicaid assistance incorporated into the CARES Act comes with many strings attached. “In order to receive it, states cannot remove even ineligible enrollees unless those enrollees request a voluntary termination. States are also blocked from strengthening eligibility standards, methodologies, or procedures and cannot increase premiums beyond those in effect in January 2020.”

Alaska Policy Forum and 29 other think tanks and taxpayer advocacy groups identified this legislative flaw in the CARES Act and wrote to Congress, requesting that states be given the freedom to direct their relief assistance to those who need it most. This added flexibility would allow state and local governments “to offset lost tax and fee revenue that would otherwise have paid for ordinary operating expenses between March 1 and December 30, or to provide one-time tax relief to individuals and businesses to revive the local economy.”

About one month after the letter was sent, Congress introduced H.R. 6652, “Flexibility for Localities and Eligibility Expansion Act of 2020,” also known as the FLEX Act, which addressed this issue. The FLEX Act “gives state and local governments much-needed flexibility in how they spend previously allocated federal relief funds. It would empower policymakers to address their state’s unique needs and help businesses and families weather the health and economic crisis.”

In a time when many families and businesses are struggling under the strains of a pandemic, this legislation is a welcome change. The FLEX Act not only gives states more autonomy from the federal government but also allows them to help their citizens who need assistance the most.