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Oregon Cities In Tug-Of-War With State Over Federal Relief Funds

The Oregon Capitol is pictured Wednesday, Feb. 20, 2019, in Salem, Ore.
The Oregon Capitol is pictured Wednesday, Feb. 20, 2019, in Salem, Ore.

Oregon is preparing to approve $400 million in aid to local governments. Cities say there are too many strings attached.

For weeks, cities and counties around Oregon have told Gov. Kate Brown they are in dire financial straits and must have a piece of the federal aid Oregon has received to help cover increased costs brought on by the coronavirus pandemic.

But as legislators appeared ready to approve the first chunk of $400 million set to flow out to cities and counties on Friday, contentment was hard to find. The state may be ready to deliver to cash-strapped local governments, but the central lobbying group for Oregon cities says Brown and others have put unnecessary limits on that money.

“It’s stunning,” Jim McCauley, legislative director for the League of Oregon Cities, said Thursday.

“If you’re going to be critical of the federal government telling you what to do” with relief money, as Brown has, McCauley added, “you should have some humility and not emulate that template.”

The tug-of-war is symptomatic of the widespread financial uncertainty being created by COVID-19. State and local governments alike are preparing for potentially steep cuts amid rising need and reduced revenue, even as the fate of future federal assistance is up in the air.

At issue is nearly $1.4 billion state government received as part of the $2 trillion CARES Act passed by Congress in March. Under the “coronavirus relief fund” created by that act, as much as 45% of funding to states is supposed to flow to local governments to help them pay for COVID-19 response needs.

But city and county officials around Oregon say they got word after the act passed that Brown had no intention of splitting the money with local governments.

“I was on a League of Cities call with a spokesperson from the governor’s office,” Hermiston Mayor Dave Drotzmann told OPB on May 6. “This person did specifically indicate that we shouldn’t be expecting funds. That was several weeks ago.”

In response, mayors and county leaders have launched a full-court press, reaching out to media outlets and pleading their case with state leadership. County officials need relief aid to pay for increased public health demands, they say. Cities say they’re seeing increased costs for first responders, and that they’re on the front lines for providing economic relief to hard-hit renters and small businesses.

“It’s not just a state response,” said Hillsboro Mayor Steve Callaway. “It’s also a cities and counties response. Money from the CARES Act needs to come to counties and cities.”

U.S. Rep. Greg Walden, a Republican who represents much of central and eastern Oregon, has also weighed in, telling Brown in a May 5 letter that she should “reconsider the decision not to share funds with local governments.”

“Many states — including our neighbors in Washington and Idaho — have already moved forward to make funds available to their local government partners,” Walden wrote.

What’s emerged in response is a proposal to give $400 million to local and county governments throughout the state who haven’t received federal relief money — criteria that exclude Portland, Multnomah County and Washington County, which got aid directly from the federal government.

That $400 million will be split evenly between a fund meant to reimburse governments for money they’ve spent on COVID-19-related efforts and direct aid that will pay for services without requiring governments to seek reimbursement.

But according to the League of Oregon Cities, there’s a problematic catch. The governor, along with House Speaker Tina Kotek and Senate President Peter Courtney, both Democrats, are largely limiting the money to public health-related uses.

That means cities and counties can only seek reimbursement for their costs “related to medical expenses, public health costs, payroll for employees dedicated to COVID-19 response, and other expenses to help with compliance with COVID-19 response activities,” according to state budgeting documents.

Direct aid to cities and counties  will also initially be focused on health, paying for things like personal protective equipment, testing supplies, contact tracers, quarantine resources and other costs. Those components are central to Brown’s framework for reopening the state’s economy

While city officials believe the state's priorities are valid expenses, McCauley and the League of Oregon Cities are urging the state to open up the $400 million to additional uses.

“We’re really concerned that there’s not as much emphasis being placed on the economic impact,” McCauley said. “We know of no other state that’s put that kind of standard in play. It just doesn’t make any sense.”

Cities have also raised issues with the $200 million fund meant to reimburse their costs. Such a system doesn’t make sense if cash-strapped cities don’t have money to pay for their needs in the first place, the LOC argues.

In response to those concerns, Kotek’s office suggested Friday that the the league was mischaracterizing the state’s plans.

Kotek, for instance, is developing a proposal to use federal aid on rent assistance, and officials are also planning increased aid to businesses, spokesman Danny Moran said. Some of that could be funded with $525 million in reserve funding the state is keeping from the federal aid package.

In addition, Kotek's office said the state could opt to use direct aid money to cities on addressing economic impacts, though no plans to do so have been made public.

“The Governor and Presiding Officers are, however, pushing to prioritize public health costs first. The economic impacts facing cities, counties, and the state cannot be overstated – and ensuring a safe, healthy reopening is absolutely critical for our economic recovery,” Moran wrote in an email. “If we do not properly handle the public health aspect of this crisis, the economic consequences will be far more dire.”

Brown's office, meanwhile, suggested state aid for economic impacts could be dependent on the state getting increased relief from Congress. 

"We know that local governments have been hard hit by COVID-19, and we had hoped for more federal funds in the first few stimulus packages to help address the undeniable needs," spokeswoman Liz Merah said. "Because we are uncertain about what further federal funding will become available, the state’s priority with the federal Coronavirus Relief Funds we’ve received so far is to prioritize reimbursements for direct public health coronavirus response efforts. Certainly economic development is a statewide concern, which we hope to address with future federal relief if and when it becomes available."

Smaller local governments aren’t the only ones clamoring for money.

Between them, the city of Portland, Multnomah County and Washington County received $247 million in direct federal aid under the CARES Act. And in a May 12 letter to those governments, Brown, Courtney and Kotek suggested they should not be expecting any more federal relief to come from the state.

“We believe that any additional state support for counties and cities should be prioritized for jurisdictions that did not receive [coronavirus relief fund] funds directly from the federal government last month,” the letter said.

Local officials say that’s not realistic.

Multnomah County, which got $28 million in federal aid, anticipates it will see $75 million in increased costs due to the coronavirus in the next year, Chair Deborah Kafoury said Thursday. The city of Portland also says it will need far more than the $114.2 million it has received in federal aid.

“The money that came to the metro region isn’t nearly enough to support our reopening and recovery,” said Sonia Schmanski, deputy chief of staff to Portland Mayor Ted Wheeler. “On the brink of reopening, and with almost $1.4 billion in funds at its discretion, the state’s announcement that it will withhold additional funds from Oregon’s largest and most vulnerable population center — and the heart of our state’s economy — at this critical time is alarming.”

But as the state prepares for potentially steep budget cuts, additional funding for Portland may be at the whims of Congress, which is debating another major stimulus bill.

“The need across Oregon — including in Portland and Multnomah County — is far greater than the funding provided by the federal government,” Moran said, “which is why the governor and presiding officers will continue advocating for additional federal aid to support the needs of all Oregonians.”

The Legislature’s Emergency Board is scheduled to meet remotely Friday, to consider allocating the first $100 million in federal relief funding to local and tribal governments.

Copyright 2020 Oregon Public Broadcasting.

Dirk VanderHart is JPR's Salem correspondent reporting from the Oregon State Capitol. His reporting is funded through a collaboration among public radio stations in Oregon and Washington that includes JPR.