COVID-19 Federal Update: Local Government Assistance Proposals

May 4, 2020

Proposals for Congress to provide assistance to local units of government take shape as discussions begin on a fourth COVID-19 spending package.

Several bills to be introduced in Congress this week will add to the list of proposals seeking to assist local units of government as they respond to the COVID-19 pandemic.

Proponents of the bills seek to not only provide federal aid to local units of government, but also amend language in the Families First Coronavirus Relief Act and the CARES Act.

While it may be unlikely for these proposals to be approved by the House and Senate as standalone bills, the hope is that Congress will consider some of the language and the proposed appropriations to local units of government in a fourth COVID-19 spending package. Cities are encouraged to contact their delegation members to urge support of these provisions.

Below is a summary of the new proposals to be introduced that the League of Minnesota Cities (LMC) and the National League of Cities (NLC) are supporting to further assist local units of government:

Eligibility for paid leave tax credits

The Families First Coronavirus Response Act expanded paid leave for workers impacted by the coronavirus pandemic. To help address the added cost to employers, the bill included payroll tax credits, but expressly prohibited public-sector employers from receiving those tax credits.

A bill to be introduced by Sen. Tina Smith (D-MN) and Sen. Dick Durbin (D-IL) would amend the language in the law to extend eligibility for the paid leave payroll tax credits to state, local, and tribal governments. The bill also ensures that governmental entities that do not pay social security taxes are able to receive the credits. A House version, the Supporting State and Local Leaders Act was introduced on April 28 with bipartisan support by Rep. Brad Schneider (D-IL).

Greater flexibility for Coronavirus Relief Funds

As previously noted, the $150 billion authorized in the CARES Act for the Coronavirus Relief Fund bars state and local units of government to use the funding for lost revenue due to COVID-19. LMC and NLC have been pushing Congress to amend the CARES Act language to allow for cities and states to use the funding to also cover lost revenue.

Rep. Don Bacon (R-NE) will likely introduce a bill to provide flexibility for states and cities to use funding received from the Coronavirus Relief Fund for budget shortfalls due to COVID-19. The bill has bipartisan support and would be a key step in helping to address the mounting economic challenges that cities are facing due to COVID-19.

In addition to the most recent bills introduced to assist cities, LMC and NLC continue to support legislation that authorizes direct federal aid to cities left out of the CARES Act.

Coronavirus Community Relief Act

It is expected that a Senate version of the Coronavirus Community Relief Act will be introduced by Sen. Martin Heinrich (D-NM) when the Senate returns on May 4. The bill’s original cosponsors will include Sen. Amy Klobuchar (D-MN).

The Coronavirus Community Relief Act provides $250 billion to cities, towns, and villages with a population of less than 500,000, which were left out of the CARES Act. The funds can be used to cover lost revenue, reimbursement for expenses already incurred, and increases in costs directly or indirectly related to COVID-19.

Other proposals

In addition to the Coronavirus Community Relief Act, other members of Congress are floating proposals to be considered that provide federal aid to cities. These include a proposal that the House may consider to provide $500 billion in relief to state and local governments.

Other proposals include a multi-year stimulus approach distributed to local units of government via a hybrid Community Development Block Grant/per capita formula, which was originally being considered for the interim COVID-19 stimulus package signed into law on April 24 but did not make it into the final bill.

LMC and NLC continue to make direct federal assistance for cities of all sizes a top priority.