Cities and counties in California are facing a potential financial burden of over $300 million after federal officials reportedly reversed their commitment to fund COVID-related hotel stays. San Francisco, which is already grappling with budget deficits, may need to allocate $190 million to cover these unexpected costs.
Governor Gavin Newsom launched Project Room Key in March 2020, placing homeless individuals in vacant hotel rooms to promote social distancing and reduce virus transmission in shelters and encampments.
Initially, FEMA promised to reimburse 75% of the program’s costs. Later, they assured California that they would cover the full expenses through July 1, 2022, and 90% thereafter until May 11, 2023.
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However, in October, California received a letter from FEMA stating that it would not reimburse hotel stays exceeding 20 days between June 11, 2021, and May 11, 2023.
This decision caught state officials off guard, prompting them to challenge FEMA’s ruling. San Francisco Supervisor Aaron Peskin emphasized that they would continue to fight for reimbursement.
Nancy Ward, Director of the California Office of Emergency Services, sent FEMA a detailed memo on Jan. 31, urging them to reconsider their decision.
She highlighted FEMA’s inconsistent application of shelter policies nationwide and referenced previous commitments to fully cover eligible costs. A FEMA spokesperson stated that they would review the request and respond promptly.
San Francisco Controller Ben Rosenfield argued that FEMA never communicated the 20-day stay limit during the pandemic, labeling FEMA’s actions as “impermissible retroactive law.”
He warned that without expected funds from FEMA, the city would need to find $114 million in its budget to cover expenses, potentially increasing to $190 million if additional reimbursement claims are denied.
The sudden shortfall poses a significant risk to San Francisco’s budget, already strained by a projected deficit of over $1 billion in the coming years. Rosenfield pledged to explore all avenues to appeal denied claims.
FEMA countered, claiming that the guidance was in place, and the regional administrator clarified the original guidance in his October letter.
The agency asserted that all states received consistent guidance and policy updates throughout the pandemic. FEMA is currently reviewing funding requests from various jurisdictions nationwide.
