Local Governments and the CARES Act

November 23, 2020

By Mark Funkhouser

President, Funkhouser & Associates, Former Publisher, Governing Magazine; former mayor of Kansas City, Mo., former auditor, Kansas City, Mo.

The word “unprecedented” tends to be overused, but it precisely describes the situation local-government leaders have faced this past year. Amid extreme polarization punctuated by a bitterly contested presidential election, local governments have also been grappling with widespread social unrest and a series of fires, floods, and other natural disasters that by themselves would have made for a trying period.

What could not have been foreseen was a once-in-a-century public-health crisis that not only would sicken millions of Americans and take hundreds of thousands of lives but also would spark the worst economic downturn since the Great Depression. Those related catastrophes produced something else that was unprecedented: the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act. Passed by Congress with startling speed, the aid package became law on March 27 and money began flowing to governments in April.

Why we did the study

Sanford, Florida, City Manager Norton N. Bonaparte Jr. captured the spirit of what we hoped to accomplish when he told me, “It’s not what’s happening but how you learn from it that really matters, and that’s where you come in — helping us learn from it.”

My team and I at Funkhouser & Associates had been writing about COVID-19 and the economic crisis while also checking in on folks in government to see how they were handling things. But in doing so we could see that no one had yet synthesized all the data and information about what governments across the country were doing with the federal aid in a comprehensive enough way to tell the full story. So when Tyler Technologies offered to support an inquiry into how local governments were using CARES Act funding to respond to the crisis, we eagerly accepted. We reviewed various articles, papers and media reports, but our primary source of information was firsthand accounts from dozens of interviews with local-government officials, policy experts and representatives of the national professional associations that support local government.

Our intent was to help local leaders learn by providing them with a playbook that details scalable, replicable uses of CARES Act funds. The federal government and the states are the bankers, but local governments are the implementers, turning dollars into programs with real impact on communities, and we wanted to gain insights into how they were doing that.

What we found

Among other things, we learned that one of the biggest challenges for local governments was just figuring out what the rules were. The funds were distributed in April to the states and to cities and counties with populations greater than 500,000, but the Treasury Department was still issuing new guidance on spending as late as September. The time crunch was another big issue. The deadline for spending money from the CARES Act’s Coronavirus Relief Fund is December 30, but the pandemic is adhering to no such end date — as of mid-November, cases were rising across the country, and to new record levels in a number of states. Finally, officials are very concerned about the fact that the economic impact of the pandemic is expected to last long after the coronavirus has faded. While aid in 2020 helped on the expenditures side, government revenues are projected to slide through fiscal 2023, which will prolong any kind of recovery. 

Despite these considerable challenges, we found that the local-government aid has had an overwhelmingly positive and beneficial effect. The money has been well spent, and officials have showed remarkable resilience and agility in responding to the challenge and the opportunity provided by the CARES Act. When the pandemic was first declared in early March, and many millions of people lost their jobs as state and local revenues appeared to be in free fall, it looked like the country was on the brink of an even-greater catastrophe. Through the CARES Act, most local governments were able to avoid deep cuts to essential staff and to step in and stabilize their communities.

One of the biggest themes we found is that the pandemic is removing the mental hurdle of “this is the way we’ve always done it.” Despite the tumultuous environment — and in many cases because of it — governments have responded in new and innovative ways. Spurred by overwhelming problems and a sudden infusion of cash, leaders have adopted new ideas at a speed that would have been unthinkable a year ago. Our playbook aims to pass these successes on by outlining what we have found to be winning strategies and tactics. We also include five case studies with deeper dives into some of the success stories we encountered.

We’d like to recognize local government officials everywhere for their tireless dedication during these unprecedented times. Those we spoke to for this project were inspiring leaders who impressed us with their passion and commitment, and we are grateful for the window they gave us into their lives and jobs. We know that they are representative of the thousands of public servants across the country who are likewise being tested as they never have before. We hope our work will provide them with support and inspiration.