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July 7, 2020

A billion in federal funds flies out the door … and more is needed

HBJ Photo | Matt Pilon Melissa McCaw, secretary of the Office of Policy and Management.
By Keith M. Phaneuf, CT Mirror

It turns out a billion dollars doesn’t last as long as it used to — especially during a pandemic.

At some point next month, Gov. Ned Lamont’s administration expects to finish divvying up Connecticut’s $1.4 billion share of the Coronavirus Relief Fund [CRF]  — Congress’ chief vehicle to provide direct pandemic relief to states and large cities.

But with more than $760 million already committed, and outstanding needs far greater than the $640 million soon to be assigned, state officials could soon be facing much harder choices than allocating federal funds unless more relief comes soon from Washington.

“It really is absolutely critical” that Congress authorizes significantly more aid, Lamont’s budget director, Office of Policy and Management Secretary Melissa McCaw, told the CT Mirror on Thursday. “We obviously have a lot of challenges ahead of us.”

The real key, McCaw said, is not just more aid from Washington, but more flexible assistance.

The CRF dollars largely were tied to covering pandemic related expenses that states, municipalities, and other entities incurred after the pandemic struck — or that they anticipate facing through the end of the calendar year.

Connecticut’s $1.4 billion could go toward medical expenses, payroll for health, public safety or other services needed to respond to the pandemic, economic support for key industries, recovery planning, or to expand government assistance programs.

What the state’s share can’t be used for is replacing lost revenue. Although tax dollars and fees stopped coming in amidst the economic chaos that followed the state shut-down, that problem can’t be fixed with federal funding.

State government faces a projected $2.5 billion deficit in the fiscal year that began July 1, and $2 billion-plus revenue holes projected for each of the two years following this one.

Connecticut municipalities estimated in June the pandemic has caused $407 million in revenue losses or delays just since March.

Hospitals are projecting more than $2 billion in added expenses and lost revenue over the past three months.

And nonprofit community agencies, which provide the bulk of state-sponsored social services for the disabled, are out millions of dollars from protective gear purchases and lost revenues.

“So much of this was dictated by CDC [Centers for Disease Control and Prevention] guidelines, McCaw said, adding that many people didn’t understand this. Still, she added, the state has used these relief funds to bolster key elements of the battle against the coronavirus.

Photo | CT Mirror/CLOE POISSON
Gov. Ned Lamont (center) and Lt. Gov. Susan Bysiewicz (left, center) toured a New Britain warehouse in recent months to highlight a large shipment of personal protective equipment, or PPEs, that arrived over the weekend from China for health care workers on the front lines of the COVID-19 pandemic.

Almost half of the $760 million in relief funds assigned so far, about $350 million, has been used to pay for testing and personal protective gear for state and municipal governments, as well as for hospitals, nursing homes, community-based social service agencies and other private health care entities.

Another $125 million has been reserved for nursing homes. But McCaw notes these funds only were to assist with expenses through June 30, and Connecticut may well have to revisit this need if the coronavirus intensifies again later in the year.

Municipalities, which pressed hard for hundreds of millions of dollars in relief, got just $75 million. But that still exceeded the $67 million reserved for state agencies’ COBVID-19-related costs.

Other major categories included $25 million for public colleges and universities and $10 million for rental assistance programs and other relief to prevent evictions.

About $45 million to date has been assigned to a wide range of health care providers, including psychiatric and substance abuse treatment centers, chronic disease hospitals, home health providers and the Connecticut Children’s Medical Center.

McCaw: Hospitals to be addressed soon

What appears to be a glaring omission from this list are most of Connecticut’s 27 acute care hospitals. But while McCaw did not provide specific numbers, she said these facilities clearly will be a major beneficiary of the $640 million Connecticut has yet to assign of its $1.4 billion allocation.

While the initial focus for using the Coronavirus Relief Funds necessarily involved testing, protective gear and assisting vulnerable elderly in nursing homes, officials said a new plan for hospitals has to be developed.

“The hospitals remain a real challenge,” McCaw said, adding that small acute care centers in Connecticut’s poorest communities are particularly fragile. 

While hospitals statewide have collectively received more than $600 million in federal relief through programs other than the Coronavirus Relief Fund, McCaw said “we know that will not fully cover their losses.”

Connecticut Hospital Association CEO Jennifer Jackson said the industry “responded rapidly and effectively to the COVID-19 pandemic,” expanding critical care capacity, forfeiting revenue by shutting down non-urgent surgeries, and purchasing “expensive and scarce” protective gear before federal or state aid had arrived.

“These actions played an essential role in why Connecticut is faring better than most states but have resulted in historic financial losses for all hospitals across the state,” said Jackson, who projects the industry is facing a $1 billion loss after factoring in federal relief provided to date. “We are hopeful that our ongoing discussions with the state regarding the need for state financial relief will be resolved in the near future.”

A second major issue, also likely to receive funding over the next month, is tied to the reopening of Connecticut schools this fall. Tentative plans released by the Lamont administration last month call for in-person classes to resume, and a testing plan for students and faculty is expected to be in place.

Regardless of whether the pandemic intensifies and interferes with those plans, education this fall likely will include a remote component. And while communities reacted quickly to accommodate remote learning in March, there will some holes in the system that need to be closed before the fall, McCaw said.

“We want to make sure as we go into the fall that devices are available for every student who does not have one, as well as [ensuring access to] connectivity.”

If students return to school for in-person classes, some parents who’ve been at home with kids hope to return to work. That means some relief funds also will be needed for early childhood development and child care programs. And McCaw said many of these programs are cash poor and will need assistance to reopen and function until clients can be billed and revenues flow in once again.

Another challenge state officials face in carving up the remainder of the CRF is that the federal guidelines dictating the fund’s use is an ever-changing work in progress.

As the pandemic rolled on, the CDC placed increasing emphasis on monitoring COVID-19-positive individuals who lack a primary care doctor, McCaw said.

Connecticut will assign a portion of its funds to this endeavor, working with federally qualified health clinics, food programs, the Salvation Army and others with strong roots in the state’s low-income communities where many residents don’t have a family doctor, she said.

Legislators: Federal aid could have gone out a little faster

The Appropriations Committee of the legislature began hearings last month with state agency heads to assess how Connecticut responded to the pandemic.

The committee co-chairs, Sen. Cathy Osten, D-Sprague, and Rep. Toni Walker, D-New Haven, both said the administration could have moved a little faster at deploying federal relief funds, but faced a difficult situation.

They also said it’s crucial to get the remaining funds assigned soon, and — if more federal aid is not forthcoming — that Connecticut discuss whether to tap its own resources to protect vital services.

For example, the $22.1 billion state budget approved for this fiscal year relies on $309 million in cost-savings the Lamont administration must identify now that the fiscal year is underway.

To achieve those savings — and not make a projected $2.5 billion deficit worse — the administration has begun the routine practice of “holding back” a small fraction of the funds budgeted for most accounts and programs.

But both Osten and Walker said local health districts should be exempt from these holdbacks this fiscal year, especially if they won’t receive any of the Coronavirus Relief Fund dollars still be assigned.

“We’re already asking an awful lot of our health districts because of COVID,” Osten said.

“If anything we should be giving local health districts more support rather than holding back,” Walker added.

Connecticut’s two U.S senators, Democrats Richard Blumenthal and Chris Murphy, both remain hopeful the Republican-controlled Senate will overcome its reluctance to authorize more relief for states and municipalities.

“What every state and local government has in common today, red or blue, is this fiscal catastrophe,” said Blumenthal, who added he hasn’t heard any complaints from constituents about how Lamont has administered federal relief. But Blumenthal did echo McCaw’s concern that future federal aid must reflect the billions of dollars in revenue that states and their municipalities have lost, and give them greater flexibility on how any assistance could be spent.

During a visit to Hartford last Friday, Murphy said additional federal aid also is vital to help states implement the testing and other public health measures necessary to stop the escalating infection rates.

Blumenthal added that the escalating COVID-19 caseload nationally — though tragic — could mobilize more support for another round of federal pandemic relief.

“God forbid it should return and boomerang back to Connecticut, which is a distinct possibility,” he said. “They’re going to take a fiscal hit, just like we did, and it won’t be short term.”

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