The CARES Act is Fake News for State and Local Governments

Local municipalities are losing money as COVID is cutting tax revenues and costs are increasing as residents require additional social support. Cities typically receive the bulk of revenue from sales taxes generated by local businesses and property taxes. Cities that rely heavily on local tourism are hit even harder.

Local governments are scrambling to find relief either from the federal government or the state government in order to meet their balanced budget requirements. Without this money, cities must cut costs and find additional sources of income, a likely choice being the cannabis industry. Local cities need us to get the funding that they need. Without funding, the cannabis industry faces more taxes. Here is how you can help.

The Federal CARES Act Does Not Care About Local Governments or the Cannabis Industry

Local governments are suffering and formally requested $250 billion from the federal government to help them through this period. Only 171 counties municipalities are eligible to receive federal funds through the CARES Act. This leaves substantially all of the roughly 3,000 counties and 20,000 cities without federal money. The minuscule number of qualifying cities is due to the fact that the CARES Act will only provide money to counties or cities with more than 500,000 people, which equates to .0007% of the local municipalities in the United States.

Even if a city qualifies, the money must be used for COVID related expenses and personnel. The CARES Act will not provide relief for lost tax revenue. This means that cities will feel pressure to cut costs in those areas that are not related to health care or policing such as legal, city planning, and other administrative areas that help cities support businesses and generate revenues.

The federal government’s money is generated by these municipalities and its local residents. It belongs to the municipalities and is administered by the federal government. The decisions on how they are allocating our money will ultimately impact the cannabis industry’s growth due to fewer city personnel to draft regulations and allocate licenses. The National League of Cities states that a new report suggests that over a million people may be terminated from public sector jobs. The federal governments’ actions will also increase the operating costs for the cannabis business as jurisdictions may enact taxes for revenues.

Over the past month, our data shows that more than twenty (20) cities started the process of adopting cannabis taxes, raising cannabis taxes, or reconsidering tax levels. This trend is sudden and reverses the course of local municipalities working with the industry to cut taxes. We expect this trend to continue unless either the state or federal government helps local governments replace lost revenue. Without a paycheck – no one can pay their bills.

What is maddening is that there are no discussions of austerity measures at the federal level. The executive branch employs over 2 million people in its non-post office, non-defense administrative agencies. Recession-proof Washington DC looks to once again escape the COVID downturn as it did the Great Recession. At this point, who is more important employees to the US economy – the DC workers who cause friction in the economy – or the state and local workers who help businesses get up and running and generate revenue.

The Federal Government should have announced an austerity process that would evaluate federal layoffs and cost-cutting measures in solidarity with state and local governments. Proof again that there is a lack of oversight of the allocation and effective spending of income tax dollars. This is even more evident as the states shoulder the response to and the responsibility for opening up the economy.

State Governments “Have No Money”

Multiple governors including Governor Cuomo publicly stated that states have not money. States also suffered severe revenue hits as unemployment hit record numbers, stay-at-home orders slashed sales taxes, and health care costs skyrocketed.

The CARES Act will provide the states with money for costs directly related to COVID. However, the federal government will not provide states with any money to replace the lost revenue. Cites that are seeking money from state governments will be standing in line with small businesses, local citizens, and other stakeholders for a limited amount of relief.

As states start mapping out the plan to restart the economy. States should consider what value the federal government has played in the past year and whether there should be a reallocation of income tax dollars from the federal coffers to the state coffers. States and its residents deserve accountability that our hard-earned money is being used effectively and efficiently as most of us are not born wealthy, work hard for our money and want to spend it wisely.

The Next Steps

COVID has revealed a lot of the broken processes in the United States. It has also made me realize how important state and local governments are to our economy, to our health, to our community, and to our future. We have been overpaying a federal government to perform administrative duties and oversight that do not help our local economies. The real people who do the work are those in the state and local governments that help us get the businesses up and running and advocate for new industries.

We need to support these people to ensure the economy can restart as quickly as possible. What can we do instead of standing by and watching cities and states furlough over a million people who help our businesses? We can demand – that for once – that the federal government cull its administrative agencies and adopt austerity measures. ABC agencies are duplicative, they do not understand local nuances or businesses, and do not help to grow industries. It is time that the executive non-defense administrative agencies show their value.

We should expect the “States-Rights” politicians to agree. We should expect the federal government to give back the municipalities money – not as a relief – but as what it truly is – the People’s Money. The People’s Money will be used to take care of our communities, restart our economies, and to innovate new industries. After COVID, we need to reassess what duties outside of defense the 2 million non-defense executive administrative federal employees should be performing and whether the cost-benefit analysis really pans out. I for one am truly bothered that Washington, DC remains recession-proof while the rest of the country lives in the real world. It is time for this to change.

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