As cities continue to seek relief from revenue shortfalls due to the COVID-19 pandemic, federal leaders put forward two bills providing different solutions to the problem.

The HEROES Act

The first bill introduced was the HEROES Act on Tuesday, May 12 by House Democrats. The Act provides more than $1 trillion to state and local governments, including $915 billion in flexible aid distributed in installments over the next year. Funds from the act will be distributed in four tranches:

1. By jurisdiction;
2. By population;
3. By the number of COVID-19 cases; and
4. By unemployment.

$375 billion of the $915 billion is set aside specifically for local governments. The funds would be divided as follows:

• $131.25 billion to metropolitan cities as defined under the Housing and Community Development Act of 1974 – cities that have a population greater than 50,000 or are the principal city of a metropolitan statistical area;
• $56.25 billion for local governments other than counties or parishes in nonentitlement areas – these funds will be given to the state to distribute for local use; and
• $187.5 billion for counties based on population.

The HEROES Act includes a provision that would also allow for greater flexibility in how remaining CARES Act dollars could be spent by state and local governments.

The HEROES Act passed the House on Friday, May 15 with mixed support from Democrats and Republicans. The bill now awaits action from the Senate.

The SMART Act

The SMART Act was introduced in the Senate on Monday, May 18 and has bipartisan support in the Senate and House. The act provides $500 billion in flexible funding to state, local, and tribal governments to backfill lost revenues as well as provide additional relief during the COVID-19 pandemic. Unlike the $3 trillion HEROES Act, the SMART Act is focused exclusively on aid to state and local governments.

The SMART Act distributes $484 billion in three tranches:

1. By state population;
2. By COVID-19 cases as of June 1, 2020; and
3. By relative revenue loss.

Under this distribution, states are guaranteed a combined minimum of $2 billion.

The SMART Act disburses all federal funds directly to the state; however, states are obligated to then pass one-third of funds received to local governments. The state would divide these funds 50/50 between county and municipal governments before further allocating funds to the different entities based on population share and revenue losses compared to similar jurisdictions.

The Act does not include a provision allowing for greater flexibility of remaining CARES Act dollars.

The SMART Act is currently in the Senate Banking, Housing, and Urban Affairs Committee.

#CitiesAreEssential

For the past two months, the federal government has excluded most cities from receiving direct federal aid for COVID-19 response. AWC has partnered with the National League of Cities and other state leagues to launch the Cities Are Essential campaign. We're advocating that lawmakers make $500 billion in flexible federal funding directly available to cities and counties over the next two years – like the two bills mentioned above. We need you to get involved – Take action today!