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GOP Lawmakers Should Issue One Last Covid Shutdown: Wasteful Pandemic ‘Slush Funds’

States are sitting on $152 billion in unobligated federal funds originally designed to ‘respond to’ a pandemic that has long since abated.

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With the federal government nearly $34 trillion in debt, in no small part because of the spending spree of the last few years, you would think Washington would have an interest in exercising some spending restraint. Think again.

A report issued this week highlighted the ways in which federal bureaucrats are still encouraging states to spend “slush fund” dollars issued more than two years ago. When it comes to buckets of money Republicans in the House should insist on returning to taxpayers, this fund represents a good — but by no means the only — place to start.

Rewriting Spending Parameters

The report by the Economic Policy Innovation Center focuses on a rule issued by the Biden administration just before Thanksgiving. The rule — issued without prior public comment, and without designation as a “major rule” subject to congressional notification — gave states and local governments until 2026 to spend funds initially appropriated in the 2021 “stimulus” measure.

The rule allows states and local governments to spend up to 10 percent of their appropriated funds on things like “reporting and compliance requirements,” “audit costs,” and “record retention and internal control requirements,” including personnel costs associated with the same. In other words, states and local governments can now use these federal dollars to fund bureaucrats’ salaries — because that’s just what the American people need: more government bureaucrats.

The report also highlights some of the ridiculous spending associated with the $350 billion provided to state and local government, some of which was previously cataloged by the Associated Press and reported in The Federalist. The list of pork projects includes $185 million in federal funds spent on golf courses, money for a circus, the use of federal dollars to fund services for asylum seekers — thereby encouraging and exacerbating the ongoing chaos at the border — and three states employing “diversity, equity, and inclusion” (DEI) coordinators on federal taxpayers’ dime.

Isn’t the Pandemic Over?

The report notes that, of the $350 billion appropriated for state and local governments in March 2021, a total of $241 billion has been budgeted by the relevant governments as of this June, while only $198 billion has been contractually obligated. But amidst the legal and procedural details about the Biden administration’s pre-Thanksgiving rule, one not-insignificant detail goes unmentioned through much of the paper.

Democrats and the Biden administration appropriated the $350 billion in state and local “slush funds” in March 2021 to, as the Treasury put it, “support [the governments’] response to and recovery from the COVID-19 public health emergency.” But the public health emergency for the pandemic ended on May 11 and arguably should have ended months, if not years, earlier.

With almost half — $152 billion of the $350 billion, or 43.4 percent — not formally obligated as of June 30, how exactly can these federal dollars help “support the response to” a pandemic after that pandemic has ended? And if states and local governments haven’t appropriated these funds after two and a half years, how much of an “emergency” do they really face that they need these dollars?

States Swimming in Revenue

To most conservatives, the answers should be obvious. In fact, as the Economic Policy Innovation Center report notes, states had little need for these funds in the first place, as the loss in tax revenue that some feared did not materialize.

While some thought the government-imposed lockdowns at the start of the pandemic would cause major revenue shortfalls, those scenarios did not pan out in most cases. Instead, the Federal Reserve’s massive infusions of cash inflated the prices of stocks (along with much else). When individuals sold stocks and other assets during this Fed-induced bubble, they realized significant capital gains, leading many states to exceed their prior revenue estimates. 

Claw the Money Back

To sum up: States are sitting on as much as $152 billion in unobligated federal funds originally designed to “respond to” a pandemic that has long since abated, while Washington just ran what amounts to a $2 trillion deficit in the fiscal year that ended in September. Clawing back these unneeded funds makes so much sense that… the Biden administration just issued the aforementioned rule designed to give states more latitude to sit on, and then spend, the federal cash.

Thankfully, Congress can have a say in the matter. When they finally complete work on the annual spending bills for the current fiscal year, Republicans should insist on rescinding every last dollar available in the “slush funds” for state and local governments. 

The Covid pandemic is long since over — so too should be the wasteful spending.


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