The U.S. Department of the Treasury is developing guidelines for eligible uses of the funding and additional guidance to states and local units of government.
Note: There is updated information on this topic. Read the latest article.
The marquis provision of the federal Coronavirus Aid, Relief, and Economic Security (CARES) Act is assistance to states and local units of government through the $150 billion Coronavirus Relief Fund, but there has been much confusion over how the funds will be distributed.
At this point, it’s uncertain what the fund means for Minnesota cities, which are facing substantial costs and loss of revenue associated with responding to the coronavirus. As the U.S. Department of the Treasury develops guidelines for states and local governments on this funding, it’s important to understand what we know and what we expect.
What we know
The language in the CARES Act states that local units of government with populations over 500,000 may claim 45% of the amount allocated for their population, with the state retaining the other 55%. The state then retains 100% of the money associated with the population that live outside of the eligible jurisdictions.
The only two local units of government below the state level that exceed 500,000 in population in Minnesota are Hennepin County and Ramsey County. Based on the formula outlined in Title VI of the CARES Act, the estimated breakdown for the state allocation and the allocation for the two counties is as follows:
- Total allocation for Minnesota: $2,186,958,839
- State share: $1,870,033,167
- Hennepin County: $220,893,126
- Ramsey County: $96,032,546
Section 601, subsection (d) of the CARES Act states that revenues shall be used to cover “only those costs that:
- Are necessary expenditures incurred due to the public health emergency with respect to the coronavirus disease 2019 (COVID–19);
- Were not accounted for in the budget most recently approved as of the date of enactment of this section for the state or government; and
- Were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.”
It is important to note that while no cities in Minnesota meet the threshold for the local unit of government direct payment, the state may be allowed to pass a portion of the state share to cities as long as the funds are used for an eligible use under Section 601, subsection (d) of the act. However, there is no language in the bill that requires states to pass any of their share through to local units of government that do not meet the population threshold of 500,000.
The League of Minnesota Cities (LMC) is working with the National League of Cities (NLC), Treasury, and Governor’s Office to encourage maximum flexibility for cities to use the funding and for the state to strongly consider reserving a portion of their state share for cities.
What we expect
We anticipate that the U.S. Department of the Treasury will develop further guidance on what can be reimbursed as a “necessary expenditure” under the funding. NLC and LMC are urging the Treasury to provide maximum leeway for local governments.
It is expected that additional guidance for states and local governments will be issued shortly after April 12, with the funding being distributed to states and qualifying local units of government by the end of April.
Of the funding the state controls, we realistically believe that a substantial portion of those funds will be reserved for state expenditures associated with responding to coronavirus. However, many of the Minnesota members of Congress have acknowledged the need for additional direct assistance to Minnesota cities.
In a letter sent to House Speaker Nancy Pelosi, 128 House members urged that direct stabilization funding for cities of all sizes should be included in a fourth stimulus package.
For more background information about this bill, read a previous article.