On Tuesday, NHMA participated in a meeting hosted by Senator Jeanne Shaheen, where local leaders spoke eloquently on the devastating consequences that a default—or that significant cuts and claw backs—would have on local governments and their residents. Many expressed concerns about the impact on borrowing and the weakening of the dollar, which would wreak havoc on the economy. 

With respect to claw backs, we were assured that the American Rescue Plan Act (ARPA) State and Local Relief Funds (SLFRF) will be safe from any proposed claw blacks. However, the latest update is that there are approximately $56 billion of unobligated money from the six other Covid relief bills that could be clawed back, according to the Congressional Budget Office. The House Appropriations Committee minority staff prepared a breakdown of the major programs that might be affected. 

The failure to act would initiate a catastrophic ripple effect throughout the economy. Our federal delegation, and the National League of Cities (NLC), are advocating to avoid a default, raise the debt ceiling, and protect the federal funding that both the state and local governments rely on to move local policy priorities forward. 

Time is running out for a deal before June 1, the date Treasury Secretary Janet Yellen has said is a “hard deadline.” The most recent news that we’ve seen is that a deal is likely to be reached before that deadline, and we are hopeful that congressional leaders will find a compromise that minimizes the impact on municipalities.