The $484 billion interim spending package enacted last week includes funding for businesses and health care, but lacks any additional funding for state and local governments.
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After several weeks of negotiation on an interim spending package, the U.S. House and Senate passed H.R. 266 to provide $484 billion to small businesses and hospitals. The bill was signed by President Trump on April 24.
Unfortunately, after weeks of advocacy by local government, House and Senate leadership failed to come to an agreement on the inclusion of direct federal aid to states and local units of government. The bill also does not provide any language altering the CARES Act to allow for money from the Coronavirus Relief Fund to be used for addressing lost revenue, a change that the National League of Cities and the League of Minnesota Cities fought for.
Specific provisions in the bill
The bill includes funding for economic development and public health.
- $310 billion for the Paycheck Protection Program (PPP), which provides loans to small businesses to help them keep their workers on payroll.
- $30 billion in PPP money set aside for small banks and credit unions.
- $30 billion in PPP money set aside for community development finance institutions.
- $75 billion for reimbursement to hospitals and health care providers to support the need for COVID-19-related expenses and lost revenue.
- $25 billion for COVID-19 testing.
Though the League of Minnesota Cities appreciates the additional funding for small businesses and hospitals, it is critical that the unprecedented economic challenges being faced by cities are addressed by the provision of direct federal assistance in a subsequent spending package. The League of Minnesota Cities will continue to press federal lawmakers and the Trump administration as negotiations begin on a subsequent spending package for direct federal assistance to cities of all sizes that can be used for revenue loss.
Guidance on CARES Act Coronavirus Relief Fund
The U.S. Department of the Treasury released guidance on April 22 for the $150 billion Coronavirus Relief Fund authorized by the CARES Act.
The key takeaways for cities from the released guidance and FAQs on the Coronavirus Relief Fund include:
- A state can transfer payments to local governments provided the transfer qualifies as a necessary expenditure incurred due to the public health emergency and meets the other criteria of section 601(d).
- Governments must return unused funds to the Department of the Treasury if they are not used by Dec. 30, 2020.
- Funds may be used to respond directly to the emergency and to respond to second-order effects of the emergency, such as providing economic support to those suffering from unemployment or business interruptions due to COVID-19-related business closures.
- The statute says that an expenditure must be “necessary.” Treasury interpreted this term to mean reasonably necessary for its intended use in the reasonable judgment of the government officials responsible for spending fund payments.
- Funds may not be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the statute.
- Payments must be used only to cover costs that were not accounted for in the budget most recently approved as of March 27, 2020. The “most recently approved” budget refers to the enacted budget for the relevant fiscal period for the particular government, without taking into account subsequent supplemental appropriations enacted or other budgetary adjustments made by that government in response to the COVID-19 public health emergency.
Treasury provides a long, nonexclusive list of examples of eligible expenditures, including the following:
- Payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to COVID19.
- Expenses of providing paid sick and paid family and medical leave to public employees to enable compliance with COVID-19 public health precautions.
- Expenditures related to a state, territorial, local, or tribal government payroll support program.
- Expenses for public safety measures undertaken in response to COVID-19.
Nonexclusive examples of ineligible expenditures:
- Expenses for the state share of Medicaid.
- Damages covered by insurance.
- Payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating or responding to the COVID-19 public health emergency.
- Expenses that have been or will be reimbursed under any federal program, such as the reimbursement by the federal government pursuant to the CARES Act of contributions by states to state unemployment funds.
- Reimbursement to donors for donated items or services.
- Workforce bonuses other than hazard pay or overtime.
- Severance pay.
- Legal settlements.