Schumer Announces Deal Allowing County to Keep Stimulus Relief Money While Meeting Federal Requirements for Proper Use

Press Release

Today U.S. Senator Charles E. Schumer announced that a final deal has been reached allowing Erie County to keep more than $40 million in stimulus funding that the federal government had threatened to take back. Erie County ran a $44 million surplus in 2009 and placed that money in a rainy day fund to cover future spending and difficult fiscal times ahead. The federal Center for Medicare and Medicaid Services (CMS) told the county that this was a potentially inappropriate use of the federal stimulus dollars the county had received in the form of enhanced Federal Medical Assistance Percentages (FMAP) funding, and that the funding was at risk of being rescinded. After receiving this notice from CMS indicating that they had opened an investigation, Schumer intervened and was able to help the county and federal government reach an agreement that would still allow the county to save the funding for future use and abide by federal regulations regarding the use of the stimulus money.

Schumer said that the purpose of the stimulus package was to save or create jobs, and that could best be done at the local level.

"We have worked with the county and the Federal government to come to a resolution that will allow the money to stay and be used in Erie County," said Schumer. "For the federal government to take back $40 million from the county when there are difficult times on the horizon would have been devastating, and could have very well led to higher property taxes in the future. I'm gratified that everyone worked together so that we could come to a solution that meets federal regulations and allows the county to keep the money it needs."

The dispute between the county and the federal government revolved around the creation of two "reserve" or rainy day funds proposed by the county to hold the $44 million surplus. CMS said that the use of the rainy day fund violated federal law established by the stimulus that required funding to be spent immediately. Schumer helped the parties reach an agreement that will allow the surplus to simply flow into the general undesignated reserves of Erie County, to be used at a later date. Approximately $19 million is now expected to be spent in the short term on road projects, pension costs and similar uses. This will allow the county to keep the funding and prevent future property tax hikes and services cuts if the county finances take a turn for the worst.

FMAP funding is an effective way to get emergency funding to county and city governments. Schumer fought hard for the funding to be included in the American Reinvestment and Recovery Act (ARRA) so that county governments would not have to lay off thousands of people, cut services and raise property taxes in the middle of a devastating recession. Erie County received $41 million through this federal funding stream, and finished the year with a $44 million surplus. It will now be able to keep that $41 million.

The dispute started in April and continued until yesterday when CMS signed off on the agreement. The letter from CMS acknowledging the deal is attached.

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