It’s Time-Limited Federal Money, So Why Not Spend it All Now?

Raleigh, N.C. — The federal government transferred $3.5 billion to North Carolina after Congress passed and President Trump signed the CARES Act. According to federal guidelines, the funding can only be used for COVID-19 related expenses incurred through December 31, 2020. It cannot be used to replace lost state and local tax revenue.

So if it’s time-limited federal money, why not spend it all now? Here are a few reasons why that’s a bad idea.

· Federal guidelines may change to allow states to use CARES Act funds to fill budget holes. In fact, we think that’s likely to happen. When it does, the CARES Act funding will become the most flexible resource we have to avoid cutting critical government services or laying off teachers. But if we spend all or most of the CARES Act money now, we won’t have enough left to help fill the multi-billion dollar budget shortfall we expect next fiscal year.

· Other federal funding streams exist to pay for areas like health care and education. For example, the Elementary and Secondary School Emergency Relief Fund provides $396.3 million directly to local educational agencies in North Carolina to continue to provide educational services to students and pay for improved remote learning. It is not prudent to use the CARES Act funding, which may be the most flexible assistance we have, to pay for an area already covered by a different federal funding stream.

· The same is true of paying for COVID-19 treatment: Congress allocated $100 BILLION directly to medical providers for COVID-19 treatment expenses. North Carolina has already received $919 million, with plenty more on the way. It would not be prudent to use flexible resources we may need to avoid teacher layoffs just to duplicate funds already earmarked for treatment.

North Carolina’s fiscal condition is strong because of smart budgeting for the last decade. For example, we have a $4 billion unemployment insurance reserve, ranked 8th-best in the country, whereas other states may soon exhaust their accounts, jeopardizing payments to those who need them most.

We will get through this challenge by thoughtfully deploying the considerable resources we have at our disposal. It is not prudent to throw money around now that we may need in the near future.

Do we really want, six months from now, to be thinking that we wish we would’ve saved some more of the CARES Act money so we didn’t have to find hundreds of millions of dollars in education funding cuts? I don’t think so.

Let’s be smart.