April 26, 2023 | Cole Arreola-Karr

As federal lawmakers make moves to address the nation’s debt limit, unobligated COVID funds are on the table for potential rollback. The National Special Districts Coalition (NSDC) sent on Wednesday a letter to Congressional leadership urging against rescinding unobligated funds, as many special districts have yet to access the resources.

Read NSDC’s letter to House and Senate Leaders

House Speaker Kevin McCarthy, R-Calif., brought forward last week House Republicans’ proposal to raise the debt limit, which includes a title broadly outlining the revocation of funds. NSDC is specifically concerned about the provision to permanently rescind “unobligated balances of amounts appropriated or otherwise made available by the American Rescue Plan Act of 2021,” which could include the State and Local Fiscal Recovery Fund (SLFRF).

SLFRF specifically authorizes state and local governments that directly received recovery funds to transfer the resources to special districts. The program funds a wide range of eligible projects, including COVID response and recovery; necessary water, wastewater, and broadband infrastructure projects; response to natural disasters; Community Development Block Grant-eligible projects; and a number of transit and transportation projects.

Rescission of COVID relief and recovery funds has in the past been proposed to offset spending on other programs, and the topic has frequently been an element of ongoing spending negotiations. The first legislative attempt to claw back unspent funds, including SLFRF, as offsets to other grant programs occurred on April 17 when Senator Rick Scott, R-Fla., offered an amendment to the NSDC-supported Fire Safety and Grants Act to do so. The amendment failed on a 47-49 vote, which needed 60 votes to succeed.

The inclusion of the rescission title in the current House debt limit bill effectively revives Scott’s amendment, as House leaders intend to move the legislation this week. Should the House bill receive the 218 votes needed to pass, it would likely fall short of the 60 votes needed in the Senate. Nonetheless, clawing back funds from local communities is now included in the debate over how Congress handles one of its most pressing issues of the year.

Click here to read H.R. 2811 (Arrington), the Limit, Save, Grow Act of 2023, which is the legislative vehicle for the House Republicans’ proposal. In brief summary, the bill would increase the debt limit by $1.5 trillion or March 31, 2024, whichever comes first; generally cut federal spending; modify entitlement and energy programs; and limit year-over-year spending increases to 1 percent over the next decade. In doing so, the bill would reduce Fiscal Year (FY) 2024 discretionary non-defense spending to equal FY22 levels. The proposal would also end electric vehicle and clean energy credits authorized in the Inflation Reduction Act. 

Contact Cole Arreola-Karr, NSDC Federal Advocacy Director, for questions/more information.