Federal debt ceiling negotiations had ripple effects in Spokane

Last month, as House Speaker Kevin McCarthy and President Joe Biden negotiated a deal to raise the debt ceiling and prevent the U.S. from defaulting on its loans, Jeff McMorris heard some jarring news.

McMorris, Spokane County’s community engagement and public policy advisor, learned that the Republican Speaker wanted to claw back some of the unspent COVID-19 recovery money given to cities and counties, and that Biden was open to the idea.

Spokane County had received $101 million through the American Rescue Plan Act, a $1.9 trillion stimulus bill aimed at helping the country recover from the COVID-19 pandemic.

McMorris, the staffer tasked with managing the county’s American Rescue Plan funds, knew $17 million of that was at risk. If the county couldn’t protect it in the next few weeks, the feds might take it.

“None of us really expected it to happen, but we thought there was enough of a chance – why leave it open for the possibility?” McMorris said. “We mentioned it to the board (of county commissioners) and they agreed there was enough of a threat that we wanted to get all of our money buttoned down to the best of our ability.”

Spokane City Council President Breean Beggs and City Council Budget Director Matt Boston said they hadn’t been especially worried about losing any of the city’s $81 million in American Rescue Plan funds.

The county had more reason to be on edge. Last year, the U.S. Treasury Department took back $1 million in unspent rental assistance money from Spokane County.

The federal government had originally said those funds didn’t need to be spent until 2025. So even though American Rescue Plan dollars didn’t need to be obligated until the end of 2024, the county didn’t want to take any chances.

Now that the debt ceiling deal is done, it appears Spokane County’s money would have been safe no matter what – even though the federal government plans to claw back nearly $30 billion in COVID-19 funds.

The threat seemed real in May, though, and the county scrambled to protect its $17 million.

McMorris said the county had two main tasks.

First, a dozen or so organizations had to quickly sign the contracts that the county commissioners had already approved. Without those signatures, the money wouldn’t be officially obligated in the feds’ eyes.

Second, staff had to come up with a way to guard $10 million that the commissioners had set aside for high-speed internet expansion in the southern, rural portion of the county.

That $10 million couldn’t be secured with a few simple signatures. Spokane County plans to wait and use those dollars in tandem with federal grants that don’t yet exist.

Moving money around was the solution.

American Rescue Plan dollars come with strings attached. Money has to go toward specific categories, such as addressing negative economic impacts or water infrastructure development.

Not all of the money is restricted; however, Governments can use a portion of their funding to replace revenue lost due to the pandemic. Cities and counties can spend the revenue replacement money however they want.

Spokane County was allowed to use $9.6 million for revenue replacement. So the county protected the broadband dollars by putting them in the revenue replacement category.

McMorris said the county shifted revenue replacement money earmarked for technology upgrades and building improvements elsewhere to make the shuffle work.

While it may have proven unnecessary in hindsight, McMorris said the county’s maneuvering ensured the $17 million is fully obligated and guarded from the feds.

“We do not expect to lose any funds,” he said.

S-R reporter Emry Dinman contributed to this story.