divider

CARES Act: Guidance for State and Local Governments

separator

By: Stephen Zaharias, William Reddington, Pierre Chabot and Kathleen Peahl

April 2, 2020

            This is the fourth installment in Wadleigh, Starr & Peters’ whitepaper series on the “Coronavirus Aid, Relief, and Economic Security Act,” or “CARES Act,” the 880-page legislation signed into law this past Friday to provide emergency financial support to individuals, businesses, and local governments across the country. This whitepaper will focus on the financial assistance and opportunities the CARES Act provides for state and local governments.

This publication is a summary of the key portions of the CARES Act as it relates to state and local governments; it does not include all the details found in the text nor regulatory guidance soon to come from various agencies. If you have specific questions, you should consult with counsel. Of course, the attorneys at Wadleigh, Starr & Peters are available to help you navigate and take advantage of the assistance offered through the CARES Act.

Coronavirus Relief Fund

The CARES Act establishes the Coronavirus Relief Fund, which allocates $150 billion to states, tribal governments, and units of local government to help combat the COVID-19 outbreak.[1] A unit of local government for purposes of this Fund is defined as a county, municipality, town, township, village, parish, borough, or other unit of general government below the state level so long as it has a population of over 500,000.[2] 

Out of this Fund, each state will receive a certain allocation based on the state’s population,[3] although each state will receive at least $1.25 billion.[4] Given its population, New Hampshire is likely to receive the minimum amount of $1.25 billion; for comparison, based upon its population, it is estimated that Massachusetts will receive approximately $2.67 billion.[5] Units of local government may apply for direct payments out of this Fund, but any amounts provided to a unit of local government will reduce that particular state’s total allotment.[6] It is unlikely that any municipality, county or otherwise in New Hampshire is eligible to receive money directly as a unit of local government; however, certain areas of Massachusetts, such as Boston, could be eligible for direct payments.   

Money received out of the Coronavirus Relief Fund can be used only to cover costs that are necessary expenditures incurred due to the coronavirus public health emergency; additionally, such expenditures could not have been budgeted for in the most recent budget, and the expenditures must be incurred between March 1, 2020 and December 30, 2020.[7] Units of local government must certify that their proposed uses of the funds comply with these requirements.[8] If the Treasury determines that a state or unit of local government failed to comply with these requirements pertaining to the use of funds, then the federal government can recoup those funds.[9]

Economic Stabilization Fund

The CARES Act provides for an Economic Stabilization Fund that appropriates $454 billion to help deliver liquidity to the financial system, which, in turn, supports lending to states and municipalities.[10] “Municipalities,” for purposes of this Fund, will likely include any municipality, not just those with over 500,000 residents.[11] The CARES Act specifies that providing liquidity could include purchasing obligations or other interests, either directly or on the secondary market, or by making loans or other advances.[12] This program could, therefore, provide much needed cash or financial stability to state and local governments struggling from economic hardship due to the coronavirus crisis. Importantly, the principal amount of a loan by a state or municipality under this program is not eligible for loan forgiveness.[13] The CARES Act does not provide significant detail about how the funds allocated will be available to local governments, though we will be monitoring announcements from Treasury about any programs or facilities that may, as the Act encourages, be created to support lending to local governments.[14]

Election Related Grants

The CARES Act also appropriates $400 million for states’ use in order to prevent, prepare for, and respond to the coronavirus during the federal 2020 election cycle.[15] States must provide a full accounting and report of how the money was used to combat the virus within 20 days of each election in the federal 2020 election cycle.[16] Any money that is unobligated by December 31, 2020 must be returned to the federal government.[17]

The CARES Act remains unclear as to how exactly the $400 million allocated will be divided amongst the states. It is possible, and perhaps even likely, however, that any grant amount will be based on the population of each state. Additional guidance will likely follow soon.

Education Grants

The CARES Act further appropriates nearly $31 billion to an Education Stabilization Fund, which includes approximately $13.5 billion earmarked for elementary and secondary education,[18] and approximately $14.25 billion for higher education institutions.[19]

Money for elementary and secondary education will be disbursed by the Secretary of Education (following a proper application by a state) in the form of emergency relief grants to a state’s educational agency.[20] Importantly, the Act mandates that each state shall allocate at least 90% of the money in the form of a subgrant directly to local educational agencies, which includes charter schools.[21] From there, local education agencies can use the funds in a variety of ways related to the coronavirus crisis, including to provide necessary resources, sanitize schools, provide mental health services, purchase educational technology, and for other activities that are necessary to maintain the operation and continuity of services in local educational agencies.[22] Note that after receiving such funds, a state has one year to use them, otherwise unused funds must be returned.[23]

With respect to the $14.25 billion available to higher education institutions, those institutions can use these funds to cover various costs associated with the significant changes to delivery of instruction during these times, including costs related to remote learning, as well as to provide emergency financial aid to students for expenses related to the disruption of campus operations.[24] The funds cannot be used, however, to cover costs pertaining to contractors for the provision of pre-enrollment recruitment activities, endowments, or capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship.[25] Additionally, some funds are allocated to specific institutions, such as to Howard University.[26]

We anticipate that additional guidance will soon be forthcoming relating to these education grants. Moreover, a whitepaper specifically devoted to the CARES Act’s impact upon colleges and universities will be available soon, which will provide further details with respect to higher education institutions. 

Miscellaneous Provisions, including Block Grants for Community Development, Public Transit, Child Care, and More

The CARES Act contains several other provisions aimed at assisting state and local governments. For example, the CARES Act provides $5 billion in Community Development block grants.[27] Of that $5 billion, $1 billion will be distributed directly to states or local government units to prevent, prepare for, and respond to the coronavirus, $2 billion to housing and community development, and the remaining $2 billion to state and local governments prioritizing areas hardest hit by the coronavirus.[28]

The CARES Act also appropriates $25 billion to the Secretary of Transportation to provide transit infrastructure grants in response to the coronavirus, which states will certainly benefit from.[29] Such funds can be used to reimburse operating costs, purchasing of protective equipment, and covering costs for personnel on administrative leave.[30]

Additionally, $3.5 billion will be available to supplement states’ general revenue funds for childcare assistance for low-income families.[31] These funds may also be used to assist child care providers to ensure that they are able to remain open (or so that they can reopen), and states are encouraged to place conditions on these funds to ensure child care providers use a portion of the funds to continue to pay their employees.[32]

            State and local governments may benefit from the CARES Act in other ways as well. For instance, the Act provides $1.5 billion for Economic Development Assistance Programs in response to the coronavirus.[33] This money is to remain available until September 30, 2020, and it could help local communities revitalize their economies following this unprecedented crisis.[34]

Another $850 million has been allocated to assist state and local law enforcement.[35] These funds can be used in a variety of ways related to the coronavirus and are not subject to restrictions or special conditions that would forbid interference with federal law enforcement.[36] In addition to this assistance for state and local law enforcement, the CARES Act also appropriates more than $1 billion to the National Guard, which will help support the states’ response efforts to the coronavirus outbreak.[37] FEMA’s Disaster Relief Fund will also receive $45 billion to address the immediate needs of state and local governments; such will provide much needed emergency help to citizens and communities as they endure, and try to recover from, this unprecedented crisis.[38]

State and local governments may also be eligible to receive a portion of the $100 million that has been allocated as part of the Emergency Management Performance Grants provision.[39] Additionally, state and local governments may be eligible to receive a portion of the $1.5 billion allocated to the CDC, which is intended to provide states and other localities and organizations with grants or cooperative agreements to carry out various actions during this time, including surveillance, epidemiology, laboratory operations, infection control, mitigation, communications, and other preparedness and response activities.[40]

Seek Counsel

This publication is meant to serve as a summary of the more significant aspects of the CARES Act, as it relates to state and local governments. It is not a comprehensive explanation of the nearly 900-page bill, nor does it account for the regulatory guidance that will come down in the next few weeks. State and local governments are urged to seek legal advice if considering any of the assistance that the CARES Act provides. The attorneys at Wadleigh, Starr & Peters, PLLC are here to address any questions or concerns that your state or local government may have about the assistance that the CARES Act offers.


[1] Sec. 5001.

[2] Sec. 5001(g)(2)

[3] Sec. 5001(c)(3).

[4] Sec. 5001(c)(2)(A).

[5] See https://www.usnews.com/news/best-states/articles/2020-03-27/what-each-state-will-get-from-the-coronavirus-stimulus-package.

[6] Sec. 5001(b)(2), (c)(5).

[7] Sec. 5001(d)(1)-(3).

[8] Sec. 5001(e).

[9] Sec. 5001(f)(2).

[10] Sec. 4003(b)(4); 4003(c)(3)(E).

[11] Sec. 4002(7).

[12] Sec. 4003(b)(4)(A)-(C).

[13] Sec. 4003(d)(3).

[14]  Sec. 4003(c)(3)(E).

[15] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, Election Security Grants, at p. 668-69 of the CARES Act.

[16] Id.

[17] Id.

[18] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, Education Stabilization Fund, at p. 752-69 of the CARES Act.

[19] Id. at p. 754.

[20] Id. at p. 756.

[21] Id. at p. 757.

[22] Id. at p. 757-60.

[23] Id. at p. 760.

[24] Id. at p. 763.

[25] Id.

[26] Id. at p. 768-69.

[27] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, Community Development Fund, at p. 857 of the CARES Act.

[28] Id. at p. 857-859.

[29] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, Transit Infrastructure Grant, at p. 839 of the CARES Act.

[30] Id. at p. 840-41.

[31] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, Child Care and Development Block Grant, at p. 736-38 of the CARES Act.  

[32] Id.

[33] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, Economic Development Assistance Program, at p. 620 of the CARES Act.

[34] Id.

[35] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, State and Local Law Enforcement Assistance, at p. 627 of the CARES Act.

[36] Id. at p. 628.

[37] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, National Guard Personnel, at p. 640 of the CARES Act.

[38] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, Disaster Relief Fund, at p. 702 of the CARES Act.

[39] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, Federal Assistance, at p. 703 of the CARES Act.

[40] See Emergency Appropriations for Coronavirus Health Response and Agency Operations, CDC-Wide Activities and Program Support, at p. 728 of the CARES Act.