SACRAMENTO, Calif. (CN) — As coronavirus cases spiked to record highs and spurred statewide lockdowns this past summer, California Governor Gavin Newsom and the Legislature scrambled to devise a plan for the state’s nearly $10 billion share of federal CARES Act funding.
Several months into the pandemic and keen to the fact local budgets were collapsing under the weight of the state’s strict and ever-changing pandemic rules, Newsom and the state’s top lawmakers decided to earmark over $1.5 billion specifically for cash-strapped counties and cities. But instead of an evenhanded approach, the Democratic leaders picked winners and losers, focusing on population centers they claimed needed extra support in fighting the virus.
In a report issued Tuesday, the state auditor blasted the decision to give large counties nearly twice the amount per resident compared to counties with populations under 500,000, even though the smaller counties experienced similar or in many cases higher infection rates.
“The California Department of Finance allocated 50% of $1.3 billion to the 16 large counties that had already received funding from the U.S. Treasury, resulting in them receiving nearly double the total per person amount of coronavirus relief funding that finance provided to the 42 small counties,” the audit states.
According to data highlighted in the audit, 16 large counties received $190-197 per resident in CARES Act funding compared to $102 for the remaining 42 counties. The discrepancy stems from the state’s questionable decision to allocate extra funding to the 16 counties that already pocketed federal funds the rural counties missed out on, according to State Auditor Elaine Howle.
In her 15-page examination of California’s use of CARES Act funds, Howle pushed back on the state’s claim the additional boost was needed due to a higher rate of spread in the more populated counties. Howle notes a handful of smaller counties registered more cases per capita over the summer than the 16 singled out by the state and should have received more of the discretionary spending.
For example, from last April to June, counties like Imperial, Kings, Lassen, Santa Barbara and Tulare had higher infection rates per 100,000 residents than Los Angeles or Riverside. The former were left out of the initial $4.5 billion CARES Act share intended solely for counties with populations over 500,000, unlike counties like Los Angeles, San Diego, San Francisco and Sacramento.
Howle says the state’s own data proves the department left the smaller counties hanging last summer when it came to budget relief. If Congress and President-elect Joe Biden dole out more pandemic relief, Howle says Newsom and the Legislature should implement a fairer approach.
“We recommend that if the federal government provides California with additional funding to distribute to local governments, the department should more equitably distribute that future Covid‑19‑related funding,” said Howle.
Of California’s $9.5 billion total CARES Act haul, $4.5 billion went to education, $2.7 billion to the general fund, $550 million for homeless housing, $1.3 billion to counties and $500 million for cities.
While Howle says the department unilaterally decided how to divvy up the county relief, it claims the allocations were made according to the 2020-21 budget plan and that lawmakers were given advance notice before checks were issued.
“The department received no indication from the Joint Legislative Budget Committee that it had failed to correctly interpret and carry out legislative intent in making these allocations,” the department said in a response letter.
The department’s deputy director responded Tuesday that Howle should go looking to the Legislature, not Newsom, for answers.
“The formula finance used to allocate these funds was approved by the Legislature as part of this year’s Budget Act,” said H.D. Palmer in an email. “If the auditor’s office has concerns over this process, they should take their policy recommendations directly to the Legislature — which voted to approve the specific mechanism that governed our actions.”
During budget negotiations last year, numerous lawmakers from smaller counties left out of the lion’s share of the federal relief pleaded for Newsom to step in and provide additional support. A bipartisan group complained that the economic restrictions were hammering rural areas just like they were major metropolitan ones, and as a result, small cities were going bankrupt trying to fight the pandemic.
“This virus doesn’t discriminate based off of population size,” said Democratic state Sen. Mike McGuire at the time.
McGuire, who represents a collection of smaller Northern California counties, said the 500,000 population marker was “completely arbitrary” and that more needed to be done for smaller cities and rural counties.
Assemblyman James Gallagher, who is suing Newsom and has accused the governor of issuing unconstitutional pandemic orders, said on Twitter the audit confirms the rural lawmakers’ complaints.
“Looks like the state auditor found out what we've been saying all along...small counties got hosed,” said Gallagher, R-Chico.
Along with a new distribution scheme for the next round of federal relief, Howle says the state needs to be more transparent when determining whether a city should be eligible for the support.
As part of Newsom’s strategy to force local governments to comply with his executive orders such as mandatory masks, the state on two occasions withheld CARES Act funding for cities that decided to flout the emergency rules.
After the Central Valley cities of Coalinga and Atwater passed resolutions declaring themselves “sanctuary cities” for businesses last summer, the state cut them off and withheld $212,000 and $387,000, respectively.
But Howle noted that over the course of the audit, the Newsom administration doled out money to another small city that approved a similar resolution. She said the governor’s office couldn’t prove it fairly “evaluated all cites” to determine if they should receive support.
“Because the Governor’s Office of Emergency Services was unable to demonstrate that it reviewed all 476 cities, we question whether other cities may have passed similar resolutions and may not have been eligible for coronavirus relief funds,” the audit concludes.
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