Rep. Darin LaHood
The Taxpayer Protection Program established under newly introduced legislation from U.S. Rep. Darin LaHood (R-IL) would provide forgivable loans to state, territory, tribal, and local governments experiencing pandemic-related budget shortfalls.
“Through no fault of their own, state and local governments face significant challenges because of the COVID-19 pandemic and Congress has an obligation to support those in need,” Rep. LaHood said.
The Taxpayer Protection Act of 2020, H.R. 8385, which Rep. LaHood sponsored on Sept. 24, would establish the Taxpayer Protection Program in the U.S. Treasury Department to provide forgivable loans to states, territories, tribes, and local governments to support budget shortfalls caused by the COVID-19 pandemic, and to protect taxpayers from fiscal mismanagement engaged in by states, including Rep. LaHood’s home state of Illinois.
“This pandemic did not create Illinois’ financial mess; however, it emphasized the long-term challenges that Illinois and other states face for failing to implement sound budget policy,” said Rep. LaHood.
Politicians in Springfield, Ill., have mismanaged Illinois’ fiscal crisis by exploding the state’s $140 billion in unfunded pension liability and piling up the associated problems upon the backs of taxpayers, the congressman said.
“Illinois shouldn’t get a blank check to bail out decades of failing to do what most responsible adults can: spend less than you earn and save for a rainy day,” Rep. LaHood said. “The Taxpayer Protection Act will ensure American taxpayers aren’t on the hook for financial problems they did not create, help those in need, and can help chart a path for a better future in Illinois.”
If enacted, H.R. 8385 would require that states, metropolitan cities and larger counties have sound pension funds, balanced budgets and reserve funds by June 30, 2022, to receive forgiveness, according to the bill summary provided by Rep. LaHood’s office. Loans would be automatically forgiven for local governments with populations of less than 250,000 and counties with populations of less than 500,000.
The bill also would require that loans that are not forgiven must be repaid in quarterly payments beginning on June 30, 2022, and interest rates would be set by the Treasury secretary based on the credit strength of the recipient using the same pricing as the Municipal Lending Facility of the Federal Reserve, according to the bill summary.
“The Taxpayer Protection Act responsibly offers states some relief, making federal aid contingent upon best budgeting practices and the promise that lawmakers cannot rack up more debt at the expense of taxpayers who are already struggling to recover from the COVID-19 downturn,” said Adam Schuster, senior director of budget and tax research at the Illinois Policy Institute.
The measure has been referred to the U.S. House Oversight and Reform Committee for consideration.