Project SAFE
The federal government has taken initial steps to help states and localities remedy their budgetary shortfalls. To help pay mounting medical bills from COVID-19, the Families First Coronavirus Response Act (FFCRA) provides that the federal government will temporarily increase its share of Medicaid expenditures by 6.2 percentage points. Under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), signed in March, the federal government will also reimburse states for half of the states’ share of unemployment benefits paid through December 2020. The CARES Act also provides for a $150 billion Coronavirus Relief Fund to be distributed among states and eligible localities to help cover direct COVID-19 costs.
These steps are not enough. Project SAFE researchers suggest the following:
Major Actions
- Grant states more unrestricted funds. [Hemel, Mason, Shobe]
- Further expand federal support for Medicaid. [Gamage, Saito]
- Further expand federal support for unemployment insurance. [Galle, Gamage, Saito, Scharff, Shanske, Shobe]
- Make interest free loans to the states or backstop broader state and local borrowing. [Gamage, Shanske]
Targeted Support
- Repeal the Internet Tax Freedom Act. [Avi-Yonah, Livingston, Mason, Shanske, Thimmesch]
- Repeal Public Law 86-272. [Avi-Yonah, Shanske, Thimmesch]
- Expand funding for higher education in anticipation of state cutbacks. [Avi-Yonah]
- Revitalize Build America Bonds for state infrastructure projects now and through the longer term recovery, which may be long. [Saito]
The Federal Reserve
The Federal Reserve also has a role to play, especially if Congress fails to pass enough support quickly. The Fed has already committed to help states and localities with short-term liquidity problems, but it should also:
