The third economic stimulus package provides a boost in funding for states and local units of government to assist with the response to COVID-19.
Note: There is updated information on this topic. Read the latest article.
The third federal stimulus package related to COVID-19 was signed by President Trump on March 27 and, in addition to support for businesses, direct one-time payments to Americans, and funding for hospitals, the law also includes substantial support for states and local units of governments.
The $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (H.R. 748) — or the ‘‘CARES Act” —is the single largest economic stimulus package in U.S. history. Intended to help prevent an economic meltdown during the COVID-19 emergency, it was passed by the Senate on March 25 and by the House on March 27.
Assistance to Minnesota cities
The package includes $150 billion for states, territories, and local units of government for “necessary expenditures” related to COVID-19 incurred between March 1, 2020, and December 30, 2020. While the bill allows for direct payments from the U.S. Department of the Treasury to local units of government, it defines local units of government as governmental units below the state level with a population that exceeds 500,000. This means that in Minnesota, only Ramsey and Hennepin County would be eligible for direct payments.
However, cities with populations under 500,000 may be able to access funding from the state allocation. Minnesota will receive $2.187 billion from the State & Local Coronavirus Relief Fund, which could be used to support local governments.
Other provisions in the bill that could be helpful for cities as they respond to challenges related to COVID-19 include:
- $5 billion increase for Community Development Block Grants (CDBG). Minnesota Cities that receive CDBG through the regular program formula will receive additional funding and the state will receive $11.2 million in nonentitlement allocation.
- $4 billion in Homeless Assistance Grants, with $2 billion that can be allocated by the Department of Housing and Urban Development directly to state and local governments based on need.
- $685 million in direct funding to public housing agencies from the Public Housing Operating Fund to provide housing stability assistance.
- $850 million for Byrne-Justice Assistance Grants that can be used to help local law enforcement respond to COVID-19, including paying for personal protective equipment and overtime pay. Minnesota will receive $12.2 million with 40% of that set aside for local distribution.
- $100 million for Assistance to Firefighter Grants for personal protective equipment for first responders.
- $45 million for the FEMA Disaster Relief Fund to assist state, local, tribal, and territorial governments for cost reimbursement of medical response, personal protective equipment, safety measures, and community services.
- $500 billion in Treasury Loans for industries, in addition to cities and states, impacted by COVID-19.
- $25 million for the existing USDA Distance Learning, Telemedicine, and Broadband program, as well as an additional $100 million for extension of the USDA ReConnect competitive rural broadband grant/loan program through 2021.
In addition to the unrealistic population threshold for direct payments as described above, several policy changes that the League of Minnesota Cities (LMC) and the National League of Cities (NLC) sought to include in the bill were not included. (See previous article.)
A provision in the second stimulus package, the Families First Coronavirus Response Act (public law 116-127), requires cities to provide the expanded paid sick and paid emergency leave. However, the local governments are expressly prohibited from receiving the payroll tax credits available to most employers for providing this benefit.
A change was sought to eliminate the prohibition language in law but the effort to correct it was unsuccessful.
Potential fourth stimulus package
LMC and NLC are encouraged that Congress is already looking ahead to a fourth stimulus package, which could be an opportunity to make corrections to policy shortcoming, as well as additional direct funding to smaller cities.
It is LMC and NLC’s priority that the fourth bill should include at the very least a fix to the tax credit prohibition discussed above and direct funding to cities small and large.
Cities are encouraged to track expenditures associated with COVID-19 for possible reimbursement from federal and state assistance.