Earlier this year, Congress enacted $350 billion in “state and local government aid” as part of the so-called American Rescue Plan. This is in addition to receiving $150 billion in relief in the first federal Coronavirus Relief Fund enacted in March 2020, and which according to a recent estimate, state and local governments are racing to spend the final $10 billion before a December 31 deadline.
While state and local governments certainly had big emergency spending needs in the height of the pandemic, many questioned whether the $500 billion in federal cash being rained down on city halls and state capitals was being targeted to actual needs related to the COVID-19 pandemic.
In fact, as Jared Walczak from the nonpartisan Tax Foundation notes, states didn’t really lose that much tax revenue at all in 2020 due to the economy’s quick rebound.
“Preliminary data suggest that states closed out calendar year 2020 with only $1.7 billion less revenue than they generated in 2019 (a decline of less than 0.2 percent), not counting federal assistance, while municipal governments actually experienced substantial revenue growth due to rising property values,” he wrote in March.
We’ve even seen 12 states take advantage of robust tax revenues to offer tax relief to its citizens. Not in California, of course.
Rather than return excess government money it doesn’t need due to the pandemic to its citizens, one California county is taking it a step further – using unspent COVID dollars to give bonuses to government workers.
According to the San Jose Spotlight, “Santa Clara County employees can likely expect a bonus in their paychecks come December” when earlier this month “the Board of Supervisors approved a request to pay more than $76 million to help each of the county’s 22,000 employees by Dec. 3.”
“Employees will receive $2,500 for their work during the pandemic, regardless of whether they were frontline workers,” the Spotlight reports, and “funding will come from the federal American Rescue Plan.”
During the hearing on the plan, Supervisor Otto Lee questioned the wisdom of spending COVID funds on what has been termed “hero pay.”
“I think for so many reasons that the amount that has been provided here . . . it’s very generous, but in some ways overly generous,” he said.
In an op-ed published in the Mercury News, San Jose City Councilman Matt Mahan called the plan “a misuse of public funds.” He noted that instead of paying bonuses to government workers, the county could have used the $76 million to “buil(d) low-cost modular apartments for 506 people currently sleeping on the streets” or it could have “ended hunger in (Santa Clara County) for eight months, according to data from Feeding America.”
Santa Clara County’s example is just the tip of the iceberg for COVID relief money being spent inefficiently or fraudulently.
Consider the ongoing saga over fraudulent benefits paid out by the Employment Development Department during the pandemic. The Department has estimated that at least $10.4 billion of the benefits it paid out between March and December 2020 was lost to fraud. Just this week, the nonpartisan State Auditor’s office said the California Department of Education “needs to do a better job of monitoring how its $24-billion in federal COVID-19 money is being spent in schools.”
And unfortunately for taxpayers, Santa Clara County’s $76 million payout to government workers likely won’t be the last example we see of the generosity of taxpayers to help those in need being abused.
Tim Anaya is the Pacific Research Institute’s senior director of communications and the Sacramento office.
