2021 Federal Outlook.

• Author: Brock, Emily Swenson
• Position: FEDERAL UPDATE

2021 marks the beginning of the 117th Congress. Looking in the rearview mirror, the hectic processes of creating stimulus legislation and implementing the statutes of the 116th Congress were two of 2020's greatest challenges. That said, we look forward to opportunities with a new Congress and a new administration, even as we address legacy issues.

We are entering the exciting time when a new administration lays out its key goals and looks for ways these initiatives can find traction in a politically divided Congress. GFOA has long strived to cultivate relationships with administrations on both sides of the aisle, and we certainly look forward to working with President Joe Biden to address the fiscal issues facing our federal, state, and local governments.

Infrastructure investment is one of the Biden administration's early goals, and GFOA will remind them about the power of tax-exempt municipal bonds to provide those infrastructure investments. We will also remind them about other near-term public finance priorities that can pave the way to long-term economic success, improved public health, and economic recovery.

New, flexible federal funding will be one of GFOA's primary initiatives in the 117th Congress. Additionally, working with the United States Treasury and Federal Reserve, we will address the tools they can use to stabilize the municipal bond market. Restoring several legacy provisions of the 2017 Tax Cuts and Jobs Act may be a focus of this Congress, which would include restoring the advance refunding of tax-exempt municipal bonds as well as the $10,000 cap on the deductibility of state and local taxes. Finally, raising the ceiling on bank-qualified bonds would provide the capital needed for community infrastructure, increasing the $10 million ceiling to $30 million, and applying the statute to the borrower level.

Below is an overview of expected federal activity in 2021, along with information about GFOA's related advocacy campaigns.

LEGACY CARES AND STIMULUS EFFECTS

It was a frenzied year for the 116th Congress, which spent much of 2020 focused on responding to the coronavirus pandemic while fighting to keep standard Congressional business moving. The Families First Coronavirus Relief Act, the CARES Act, and HR133 The Stimulus Omnibus were products of bipartisan and bicameral partnerships to secure trillions of dollars to help individuals and communities overcome the effects of the pandemic. (See Exhibit 1.) What is normally one of the most important functions performed by Congress--funding the federal government--was dwarfed and frustrated by the efforts of legislators to address the ongoing public health crisis. These concerns remain as we enter 2021.

Leaders have indicated that in 2021, more support is coming from the federal government. The costs of purchasing and distributing the vaccine, along with anticipated declines in revenues, will indeed warrant additional fiscal relief. But lawmakers will need to consider the effects of the previous stimulus...