ERIC SCHMITT, Senator for Missouri

WASHINGTON – Today, Senator Eric Schmitt led his colleagues in sending a letter to the Department of the Treasury questioning why the Department issued a rule redefining the definition of “obligation” with respect to the Coronavirus State and Local Fiscal Recovery Funds (SLFRF), opening the door to a misuse of American tax dollars:

“While Treasury may assert that this new definition of ‘obligation’ simply provides ‘additional flexibility’ to recipients, this redefining tortures the construction of ‘obligation’ beyond the sensible plain meaning of the word. Black’s Law Dictionary defines an obligation as ‘a formal, binding agreement or acknowledgment of a liability to pay a certain amount or to do a certain thing for a particular person or set of persons; [especially] a duty arising by contract.’ Furthermore, Congress has established that an obligation shall only occur when ‘supported by documentary evidence’ of a binding agreement or purchase,”the letter reads.

“Mere days before Treasury issued the Rule, the U.S. Government Accountability Office (GAO), which issues legal opinions to federal agencies on appropriations law, released a report regarding the SLFRF. In the report, GAO defined an obligation as ‘a definite commitment that creates a legal liability of the government for the payment of goods and services ordered or received. . . . An obligation occurs, for example, when an order is placed, a contract is signed, a grant is awarded, or a service is purchased.’ As is clear by these definitions, there must be a present and definite agreement for an obligation to occur—not a future intention to come to an agreement. Therefore, Treasury’s new definition—permitting recipients to make future agreements to spend SLFRF funds in 2025 and 2026—stretches the word “obligation” outside of any plain use of English,” the letter continues.

“It is imperative that Treasury rescind this Rule immediately. ARPA was clear that SLFRF recipients have until December 31, 2024 to obligate their funding, and until December 31, 2026 to liquidate those obligations. With our national debt hitting unprecedented levels, the federal government must act as responsible stewards of the taxpayer’s dollars. An extension of COVID-19 era programs is especially perplexing as this Administration ended the federal Public Health Emergency for the pandemic on May 11, 2023. If Treasury continues with this tortured definition of obligation, Congress will have no choice but to introduce a resolution of disapproval under the Congressional Review Act,” the letter concludes.

“The Coronavirus State and Local Fiscal Recovery Fund (SLFRF), which the Biden Administration has treated like a slush fund, is a quintessential example of government waste, and a critical opportunity for taxpayer savings. Even worse than the initial waste is Treasury’s new Hoarding Rule, which allows states to stash this money for later unspecified uses. We are grateful to Senator Schmitt for championing common sense and highlighting these abuses, including Treasury’s overreach on the definition of an obligation. His comments are spot on, and we hope this is the beginning of a groundswell of opposition in the U.S. Senate,” said Brittany Madni, Executive Vice President, Economic Policy Innovation Center

The letter is cosigned by Senators Mike Braun (R-IN), Ron Johnson (R-WI), Rick Scott (R-FL), Mike Lee (R-UT), and Roger Marshall (R-KS).

BACKGROUND:

Read the full letter attached, and read Economic Policy Innovation Center’s report on the rule here.