What the $1.7 Trillion Spending Bill Includes for States and Localities

Update: On Friday, Dec. 23, the U.S. House voted 225-201 to pass the spending bill, sending it to President Biden's desk for his signature.

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Despite an attempt by conservative Republicans to reject a federal spending package in favor of preserving current funding levels, the Senate on Thursday approved a $1.7 trillion “omnibus” budget measure and sent it to the House, which is expected to pass the bill on Friday. The package will unlock money to fund programs found in other major pieces of recent legislation, including laws to upgrade the nation's infrastructure and expand semiconductor manufacturing.

The Senate voted 68-29 to approve the legislation, beating back an attempt by conservatives during the amendment process to strip $9.8 billion in so-called earmarks, nearly all of it headed to states and localities. Senators were also able to add a provision sought by states and localities that would allow them to use coronavirus relief funds on additional infrastructure projects and natural disaster relief.

If approved, the omnibus will provide $58 billion in highway funding and $3.4 billion to repair and build bridges as called for in the Infrastructure Investment and Jobs Act. It will allocate $500 million in initial grants for a new initiative that aims to create regional “technology and innovation” hubs around the country. And it will add more than $400 million to a grant program that helps states and localities fund homelessness programs.

In approving the omnibus bill, a bipartisan majority of senators held off a push by conservatives in recent days to delay the funding debate until next year when Republicans will be in control of the House and have more leverage to negotiate a smaller spending package.

Conservatives like the House’s top Republican, Kevin McCarthy of California, favored a temporary spending bill that would have frozen new funding for the tech hubs initiative and additional spending on infrastructure and other programs until a divided Congress could strike a spending deal sometime next year.

Michael Wallace, the National League of Cities’ legislative director for housing, community and economic development, explained that if the bill were punted into next year it would throw cities counting on the money into uncertainty as they write their own budgets. He also noted that keeping spending at current levels would delay increases in funding to address homelessness and other issues.

The spending bill, among other things, will create an $85 million Community Development Block Grant program called “Yes In My Backyard,” which is geared toward reducing zoning and land-use regulations that can make it difficult to build new and dense housing.

According to a description of the bill by the Senate Committee on Appropriations, the program “will reward state, local, and regional jurisdictions that have made progress in improving inclusionary zoning practices, land-use policies, and housing infrastructure.” 

The new program would aim to address single-family zoning, which the Biden administration has said can be discriminatory toward people of color and low-income households by discouraging multifamily housing in wealthier areas.

The bill also includes a requirement for all states to provide 12 months of continuous Medicaid or Children’s Health Insurance Program (CHIP) coverage for children, even if their parents go on and off of Medicaid due to fluctuations in earnings that determine their eligibility.

According to an analysis by the left-leaning Center on Budget and Policy Priorities, 24 states already provide this type of continuous coverage for children with Medicaid and 32 states with CHIP. The new requirement will guarantee coverage for over 15 million children in the states that haven’t taken the step. “Continuous eligibility can help improve health outcomes and reduce administrative burdens by reducing churn into and out of coverage,” the analysis said.

Tom Cochran, CEO and executive director of the U.S. Conference of Mayors, said of the spending package, “It will support and fund many programs the group fought for over the past 18 months," including ones in last year’s infrastructure law and this year’s legislation to boost domestic semiconductor production—known as the CHIPS and Science Act—which created the tech and innovation hubs program.

“These investments will help us continue to build economic opportunity in our cities and enrich the lives of our residents,” Cochran said in a statement to Route Fifty.

State and local governments dodged another bullet when a bipartisan majority of lawmakers rejected an amendment by Sen. Ron Johnson, a conservative Wisconsin Republican, that would have struck from the bill $9.8 billion in earmarks. That proposal failed on 34 to 63 vote.

Johnson, speaking on the Senate floor, complained about sending billions to states and localities, even though states have about $380 billion in surpluses.

“This is grotesque,” he said. “Earmarks are the gateway drug to mortgaging our children's future. This abuse must stop.”

Democratic Senate Appropriations chairman Patrick Leahy of Vermont, however, defended the earmarks, saying that they allow members of Congress to send money to their communities for needed projects.

“I speak with community leaders, dairy farmers, small business owners across my state every day,” he said. “I've done this for 40 years.”

Earmarks, in which federal funding is set aside for specific projects requested by members of Congress, were banned in 2011, with critics deriding the practice as an example of Washington’s political culture that steered money to influential lobbying interests. 

But in resurrecting earmarks last year, House Appropriations Committee Chair Rosa DeLauro, a Democrat from Connecticut, enacted a number of reforms, including requiring that only state, local or tribal governments be able to receive the funding.

Among the earmarks in the omnibus bill is funding for favored road and highway projects, such as $100 million for the Alabama Transportation Department to replace a four-lane bridge in Tuscaloosa, as well as spending like $40 million for equipment at the Tulsa International Airport in Oklahoma.

But potentially as significant as what weeks of negotiations added to the bill are a number of proposals significant to states and local governments that were left out.

The American Heart Association said in a statement that it was “deeply disheartened” that the omnibus bill “ignored vital child nutrition provisions,” including allowing more school districts to offer free meals to all students.

The group had sought the restoration of a pandemic-era Agriculture Department waiver created by the Trump administration in 2020 and extended by Biden, which allowed schools to get federal reimbursements to offer free meals to all students, not just those in poverty. After the waiver expired in June, only schools where at least 40% of students are on federal poverty programs qualify for the reimbursements, leading fewer schools to offer the free meals.

Among other provisions left out of the bill were restored expansions of tax credit programs for households with children and to support the construction of low-income housing.

Stockton Williams, executive director of the National Council of State Housing Agencies, lamented in an email the failure to restore an increase to the low-income housing tax credit, which goes to states and is then passed to developers to help subsidize projects. 

But he did applaud other measures that maintain or increase funding for housing programs. According to an analysis conducted by Williams, the bill increased funding for Homeless Assistance Grants to states and local governments by $420 million, to $3.6 billion. 

Mark Ritacco, chief government affairs officer for the National Association of Counties, said counties were also pleased the bill maintains $533 million in funding for the Interior Department’s payment-in-lieu of taxes program. The payments go to counties to make up for tax revenue that they can’t collect on federal lands within their borders. For many jurisdictions, especially those in the Western U.S., the money is an important source of revenue.