Arkansas is one of two states that will refuse federal funding available for the second phase of pandemic Emergency Rental Assistance as Gov. Asa Hutchinson declared the economic climate robust enough that it was no longer needed.
Hutchinson said Friday that he was sending a letter to U.S. Treasury Secretary Janet Yellen to notify her that Arkansas plans to draw down no more than 39%, or about $60 million, of the available funds only to support housing stability programs that may include rental assistance components.
Critics said the decision was puzzling and disappointing.
The state received $173 million from the federal government at the beginning of 2021 to distribute to tenants who were behind on rent and utility payments because of the fallout from the covid-19 pandemic.
"Currently we have $6.7 million remaining in our rental assistance funds, and the federal government wants us to receive $146 million of additional money," Hutchinson said. "Our economy has returned. There are jobs aplenty out there, and we have existing programs in place for rental assistance that were pre-pandemic. We are back working to the same extent pre-pandemic, and we have the same opportunity moving up the economic ladder, so we need to move back to the same rental assistance we had before."
Arkansas' unemployment rate is 3.1%, or 16th-lowest among U.S. states, according to the Bureau of Labor Statistics.
Hutchinson said the decision makes Arkansas one of only two states to have declined the full amount of federal dollars. Nebraska Gov. Pete Ricketts has rebuffed pressure from the Treasury Department and his own state Legislature to accept the next round of federal rental assistance, including vetoing a measure that would have required the state to apply.
Neil Sealy, an organizer with Arkansas Renters United, said statistics alone make Hutchinson's decision puzzling.
"I believe [the decision] is completely heartless and disconnected from the reality of the people on the ground," he said Friday afternoon. "The governor should be ashamed. We get calls every day from people who are still recovering economically from the pandemic. We get calls every day from people who have paid the landlord from rental assistance, but the landlord refuses to renew their lease. Therefore, they have to move and need assistance for that, as well."
Arkansas Advocates for Children and Families Executive Director Rich Huddleston also expressed disappointment in the governor's announcement.
"The state government has the ability and the obligation to help make Arkansas a better place to be and raise a child, and turning down this investment goes against that commitment," he said. "Tens of thousands of Arkansans are either behind on rent or aren't confident in their ability to make next month's payment. Thousands that have applied for assistance have been denied. Instead of refusing to put money in the pockets of Arkansas families in need, we should be making it easier for families to stay in their homes and make ends meet."
The Republican governor said he planned to go over the state's request on Friday with an official connected to the White House.
"I hope they approve our request for flexibility to have this type of housing stability initiative in Arkansas and won't insist on us taking the full amount based on rental assistance," he said.
Hutchinson said he would propose an alternative option to the federal government in which Arkansas utilizes 39% of the funds to allow nonprofits, such as Our House and Restore Hope, to help families or individuals who are homeless or at risk of homelessness move from crisis to long-term economic stability.
"What is it that the tenant or the individual needs?" Hutchinson said. "Some peer specialist to help them get the training they need to get a job? Is it drug addiction issues that we need to bring support in for? What is the challenge in housing stability that we can utilize these funds for specific efforts to make a difference in the lives of Arkansans?"
Hutchinson was asked at a Friday news conference why the state shouldn't take the federal funds anyway, and he mentioned that he gave the matter a lot of thought.
"First of all to me, when there is not a need in the state and that we haven't fully utilized the resources and that we have fully recovered and in a pre-pandemic stage, it makes no sense to start an absolutely new rental assistance program that would go infinitum," he said.
Hutchinson also said the funds would come with restrictions that would not allow states to distribute assistance to both landlords and tenants. Instead, the funds must go to the tenants.
"Under the restrictions they have and under the best priorities that we would want to spend that money on, if we can't have that flexibility, it makes no sense to the taxpayers to utilize it for this purpose," he said.
Sealy said he didn't understand why that would be problem.
"The tenant is the one who has to pay rent," he said. "The tenant is the one who is facing homelessness."
The governor said the state is shifting its focus from supporting individuals who may have had short-term economic challenges from the pandemic to helping families achieve long-term economic stability and growth.
"We have programs that are in place and community organizations that will help with rental issues, but we are going back to the rental support we would have pre-pandemic that makes sense to me," he said. "This money, I wish it could go back to the treasury, but actually it will be recouped and sent elsewhere where there are greater needs, and to me that is responsible management of the taxpayer dollars."
Hutchinson said the decision does not mean that Arkansans in need have been left without assistance.
"Community action agencies throughout the state still have access to more than $6.7 million in remaining funds for this federal fiscal year to assist low-income tenants in crisis from the Emergency Solutions Grant program," he said in his letter.
More than $18 million was distributed to 36 social services agencies across the state in 2020 through the Emergency Solutions Grant program for covid-19 aid. The annual grant from the U.S. Department of Housing and Urban Development was funded in 2020 by the Coronavirus Aid, Relief and Economic Security Act.
Sealy said the remaining money doesn't come close to covering the needs around the state.
"It's very difficult to apply, and many people were left out the first time because they didn't have access to the internet," he said. "Some waited for months and months and months before hearing anything."
Sealy said one of the main flaws in Hutchinson's concept of economic stability is that it doesn't take into account how these late rental fees have stacked on top of each other.
"There may be more jobs available, but people got very far behind," he said. "And even people who are back on their feet and working are finding themselves behind on the rent. Many late fees are large and cause debt to balloon so people never catch up."
Huddleston said that although the unemployment rate is low, Arkansans are still struggling to get and maintain gainful employment because of child care, housing, transportation and other expenses.
"We should be making it easier for families to keep a roof over their heads," he said. "We only have a state surplus because we underspend when it comes to investing in our own people. ... In a state where 22% of the children live in poverty, we cannot afford to dismiss federal dollars that could provide safety and security for families in need."
Sealy said it has become obvious that homelessness specifically in Little Rock is growing and becoming more visible.
"The pandemic had a major effect on those who were low-income, and in particular it had an affect in Black neighborhoods in Little Rock and other communities," he said. "We are not out of the woods yet."
Last month, U.S. Rep. French Hill, R-Ark., sponsored legislation that he hopes will stop the redistribution of millions of unspent federal dollars -- aimed at helping tenants who are dealing with financial hardship because of covid-19 -- from rural to urban areas.
The U.S. Department of the Treasury's "clawback" of pandemic rent-relief funds comes at the expense of renters in less-populous areas, Hill said.
Hill introduced the Protecting Rural Renters Act, which would require the Treasury Department to stop taking back federal rent-relief funds that would help rural tenants -- funds distributed by state governments rather than counties or cities -- and return the funds it has already taken back, including nearly $9 million from Arkansas.
The retraction of funds, announced in January, is an "attack on families in rural America by the Biden administration," Hill said on the House floor.
The Treasury Department plans to give the unspent funds to California, Illinois, New York and New Jersey, where the demand for rent relief is highest. Hill noted in his floor speech that these "blue states" have already distributed millions in rent-relief funds.
Keesa Smith, deputy director at the state Department of Human Services, said Friday that the agency was aware of Hill's bill and the conversation around it.
"We have looked at our current program, and there is coverage statewide and all areas of the state have access to our current funds [$6.7 million] and all our plans are ensuring that those individuals in greatest need no matter where they are located in the state have access to those housing stability funds," she said.
The federal Consolidated Appropriations Act distributed $46.5 billion in rent-relief funds in early 2021. The Treasury Department announced that 4.7 million payments had been made and $30 billion had been spent or obligated by the end of February.
Cities and counties with more than 200,000 people received their own pots of money from the Consolidated Appropriations Act, while state governments were responsible for distributing funds to all other areas.
The Department of Human Services made adjustments to its rent-relief program at the urging of Congress, state legislators and renters' advocates.
The program initially required landlords to submit matching applications for each tenant, and some landlords refused to participate. The Department of Human Services loosened this requirement in September after pressure from Congress.
In January, the department paused its acceptance of rent-relief applications to "ensure we don't take in more eligible applications than we can fund," department spokeswoman Amy Webb said at the time. The department enacted the pause when it altered the distribution process so checks would be issued to both the tenant and the landlord as a fraud prevention measure, at the recommendation of some state legislators.