Biden Administration’s Move to Let States Stash COVID-19 Cash Could Cost Households Up to $1,200 Each

By authorizing state and local governments to “hoard” federal COVID-19 funds long past the 2024 deadline for obligations, a rule from the Biden Administration’s Treasury Department could cost the average household up to $1,200.

Bidenomics Slush Fund Spending

In 2021, when Congress passed the partisan American Recovery Plan Act (ARPA), it allocated $350 billion for a Coronavirus State and Local Fiscal Recovery Fund (SLFRF) intended to buoy state and local revenues and help pay for pandemic recovery responses. This was in addition to $520 in other COVID-related federal funds provided to the states.

To date, $241 billion of those funds have been allocated in state and local government’s budgets, $198 billion has been obligated for specific projects, and $175 billion has gone towards projects that are currently underway. That means $109 billion has not yet been allocated, $43 billion of what’s been allocated has not been obligated by state and local governments, and $24 billion of what has been obligated has not yet gone toward the planned projects.

The Biden Administration’s rule (the “Hoarding Rule”), which the Treasury Department obscured by publishing the week of Thanksgiving, effectively extends the law’s deadline so that states can spend taxpayer-funded money intended for COVID-related expenses further into the future. In other words, more than five years from the start of the pandemic and more than two years after the federal pandemic declaration ended in May 2023. All that states must do is say what they will spend the money on by April of 2024, and they can use it into the indefinite future.

The Hoarding Rule means that a minimum of $13 billion, and potentially tens of billions more, that taxpayers might otherwise have been spared from footing the bill for can now be hoarded to spend on things that are, at best, only tangentially related to COVID-19.

Impacts on American Households

Most Americans are no longer significantly affected by the pandemic, but virtually all of them are feeling the consequences of policymakers’ continued response. The $350 billion SLRF was part of the federal government’s $7.5 trillion in newly authorized spending that spurred excessive inflation. The resulting decline in workers’ real earnings and increase in borrowing costs that ensued have cost the typical American family an estimated $7,400 in annual income since the start of 2021 and added $13,000 per year to the cost of purchasing a home.

The $175 billion in SLFRF that’s gone out the door amounts to more than $1,300 per household, but that money hasn’t been distributed evenly, or even based on need. Rather, it’s been a slush fund for state and local governments to pay for ordinary expenses, boost their revenues (that were up 13% and 24% in the two years following the pandemic), give bonuses to government workers, and dole out cash to select organizations under a myriad of all-encompassing expenditure categories.

For example, 1.4 million mostly public employees received “premium pay” bonuses that averaged $2,300 a piece. Washington state gave $1,000 to every resident 18 years and older who wasn’t eligible for federal stimulus payments and unemployment insurance bonuses “due to their immigration status.” Dozens of areas offered residents subsidized gift cards to restaurants and other stores. Multiple cities upgraded their dog parks with WiFi. One county’s “Painted Pony Rodeo” got $50,000 to pay increased feed bills.   

In scrolling through the more than 100,000 SLFRF expense line items, it looks more like an end-of-year “use-it-or-lose-it” fund than a COVID recovery effort. And now, the Treasury’s rule morphs it into a “name-it-and-claim-it” fund.  

An Opportunity for Lawmakers

With most Americans living paycheck to paycheck, and the government debt that’s been taken out in their name growing exponentially, politicians should not indemnify government waste and political giveaways.

By preventing an expansion SLFRF spending, lawmakers could save every household in America at least $100 and up to $1,200. Congress should also disapprove of Treasury’s rule through a Congressional Review Act, preventing it from taking effect.

And in the meantime, lawmakers should prevent a flurry of wasteful spending by rescinding all unobligated SLFRF funds and providing additional oversight of existing funds.