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May 28

The State Can Help Ease Local COVID-19 Budget Challenges. But will it?

Posted on May 28, 2020 at 4:46 PM by Thomas Reeves

It's no secret the City of Modesto's budget has been impacted greatly by the COVID-19 pandemic, and the Governor's budget for Fiscal Year 2020/2021 does not go deep enough in assisting California cities of our size.  Below is an excerpt from a letter I've written to our state legislators asking for advocacy on our behalf.

As you may know, during the Senate Budget and Fiscal Review Subcommittee No. 4, the Governor’s Administration clarified that the $450 million of CARES funds dedicated to cities will be split with $225M going to seven cities with populations between 300,000 and 500,000 and the other $225M for cities with populations under 300,000. This puts Modesto five cities away from funding (as the 18th largest city in the State of California), and based on our calculation Modesto would only receive approximately $2.2M for COVID-19 expenses. 

This funding formula provides seven communities with a total population of approximately 2.6M the same amount of funding as 469 smaller cities with a population of 22.1M. When viewed on a person by person basis, cities with populations above 300,000 will receive funding equal to $85.59 per resident, while the other 469 cities will receive funding equivalent to $10.18 per resident.  We implore you to work with the Governor and your colleagues in the Legislature to revisit this formula and recommend a more equitable solution. 

Specifically, we would recommend that you consider the below revisions, either separately or as a combination of the two:
  • More equitable split of funds between cities – As noted above, half of the $450 million of Coronavirus Relief Fund (CRF) is proposed to go to communities that represent 10.5% of the California residents eligible to receive funding, while the other half of funding goes to communities representing 89.5% of eligible residents. As an example that further demonstrates the disparity, under the current formula, the City of Modesto would receive $26.9 million less than the City of Stockton, despite only having 97,000 fewer residents. We would recommend a split of the funding that would provide more equal funding to all California cities.  For these reasons,  the City proposes an equal distribution of funds by population, which would result in smaller cities receiving critical financial relief.  
  • Increase overall level of funding provided to cities – The May Revise proposal for distribution of Coronavirus Relief Funds provides $450 million to cities and $1.3 billion to counties.  Additionally, the proposal does not provide any funding for cities that received direct allocations of CRF funding from the federal government; however, the May Revise proposal provides approximately $644.5 million in funding to counties that have already received direct allocations of CRF funding from the local government.  We would recommend that the Legislature revise the funding distribution split between cities and counties to ensure that those entities who have not yet received any CRF funding have access to these vital funds.  To that end, we would recommend that the CRF allocations be revised to provide $1 billion to counties and $750 million to cities.  This distribution split would ensure that the 476 communities that have not received any CRF funding, will be provided additional resources.
COVID-19 has decimated Modesto’s local economy. As a result of the Governor’s stay at home order and the sales tax deferral program, these impacts are estimated to amount to $11.3M. Additionally, our unanticipated expenses include the rapid activation of an emergency operations center, procurement of personal protective equipment, initiation of frequent facility sanitizing, and other essential costs required to ensure the safety of the public and employees are expected to easily exceed the allocation of funding that the City would receive under the current May Revise proposal. 

As we’ve experienced over the course of the past couple of months, COVID-19 has not shown mercy to jurisdictional boundaries or industries. For these reasons, the City of Modesto proposes a funding formula that is fair to all cities and strongly opposes the arbitrary allocation of funds to larger communities at the expense of smaller cities, and requests your support. We are happy to meet with your office to discuss potential options that we can explore to ensure that all cities can meet this moment.