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Much of Cincinnati's American Rescue Plan funds expected to fill budget gaps

Cincinnati City Hall
Posted at 3:22 PM, May 07, 2021

CINCINNATI — In just four days, the federal government is expected to begin dispersing money to cities and counties from the American Rescue Plan, and Cincinnati will receive about $300 million over a two-year period.

The city began allocating some of the funding this week, but more money will go to the budget deficit than originally expected.

So far, the city's allocated about $134 million. Most of that is slated to fill budget gaps due to the impact remote working is expected to have on city taxes. It also means less will be used as stimulus funds for local organizations

Cincinnati City Council member Steve Goodin has been cautious about spending the roughly $300 million the city is receiving through the American Rescue Plan.

"Post COVID, not everyone is going to come back to the office,” he said. “We won't be able to tax them over time. It's going to be a very slow bleed."

The earnings tax funds the city's budget and can only be collected from people working within city limits. During the pandemic, Governor Mike DeWine passed an emergency order allowing cities to collect the tax from people who work remotely for city companies while living outside of city limits.

That order will eventually be lifted, and Goodin said if people don’t return to work Downtown, the tax revenue will be lost

"We know that 71% of our revenue as a city comes from the earnings tax and we know that more than half of those workers do not live in the city,” he said.

Because of that, the University of Cincinnati Economic Center predicts the city will lose about $34 million in income tax in 2022. That puts the city's budget deficit next year at a projected $67 million.

Because of that, Mayor John Cranley said the city is setting aside more money from the American Rescue Plan for the general fund budget.

"We don't know yet what that will do exactly to reduce our earnings tax, but we know that it's going to be significant, which is why it's so important to put the vast majority of money into reserves and savings,” Cranley said.

Democratic Senator Sherrod Brown, who visited Cincinnati Friday to discuss vaccination progress and the American Rescue Plan, said the new bill gives more time for local government to spend the funds.

"We did three things: more of this goes directly to cities and counties; number two, they would have the time to spend it without a deadline that would cause them to do things they didn’t want to do… and three, they had flexibility," Brown said.

Of the $134 million in American Rescue Plan funding the city allocated Wednesday, about $107 million will be used to fill budget gaps or be put into budget reserves. That leaves less than $30 million for stimulus grants for local organizations.

"We were able to rush help to social service organizations, art organizations, restaurants, small businesses -- and we're going to be doing some more of that,” Cranley said.

Goodin said he believes that’s the right thing to do.

“I've said this from the beginning, this is not a transformative amount of money, it is a restorative amount of money,” he said.

City Council’s budget and finance committee will hold a special meeting Tuesday to discuss these funds further -- the same day cities and states are expected to get their first disbursement of money from the federal government.