Direct Grants to States for Coronavirus Expenses
Title V of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act” or the “Act”), Section 5001, provides for the distribution of $139 billion to the States, excluding the District of Columbia, from the Coronavirus Relief Fund (a new Title VI to the Social Security Act). Wisconsin’s estimated share of the Relief Fund is $2,258,000,000.
Large Local Government Share from Wisconsin’s Allocation
Section 601(b)(2) of new Title VI to the Social Security Act permits a “local government” to present a certificate that it will use funds for the authorized purposes described below and, thereby, to receive a direct disbursement of part of the funds that would otherwise be distributed to the State in which that local government is located. The only political units within a State that can make such requests are units of local government, such as counties or municipalities, with populations of 500,000 or more. The amount of such direct funding these local governments could receive is based on its proportion of the State’s total population applied to only 45% of the State’s total allocation from the Coronavirus Relief Fund.
Wisconsin has three local units of government that qualify to receive funds directly, based on their population: Dane County, Milwaukee County, and the City of Milwaukee. These governmental units could receive an estimated $360.6 million of the total State allocation, with the remaining $1.9 billion being paid to the State. The breakdown among the qualifying local government units is Dane County: $93.4 million; Milwaukee County: $164.5 million; and City of Milwaukee: $102.7 million. Wisconsin’s payment will take the form of direct aid to the state’s general fund, and the payment is expected to be made around April 24, 2020.
Authorized Uses of Funds
Each State and eligible local government recipients are authorized to use their share of the $139 billion Coronavirus Relief Fund to pay only non-budgeted, COVID-19 related necessary health emergency expenses incurred from March 1, 2020, through December 30, 2020. States that have enacted budgets prior to March 27, 2020, may use the funds for unanticipated expenses related to the public health emergency.
Coronavirus Relief Fund payments may not be used to directly account for revenue shortfalls related to the COVID-19 outbreak. Such funds, however, may indirectly assist with revenue shortfalls in cases where expenses paid for by the Coronavirus Relief Fund would otherwise widen the gap between government outlays and receipts. For example, if (roughly) $2 billion in Coronavirus Relief Fund assistance is sent to Wisconsin and the State’s revenues are $10 billion lower than expected and the State has $5 billion in new COVID-19-related expenses, the Coronavirus Relief Fund assistance may be used to reduce the fiscal gap (from $15 billion to $13 billion) regardless of whether it applies to revenues or spending.
The Department of Treasury has also indicated that states may, at its discretion, use the funds provided to cover eligible expenses of any local unit of government, including those with populations of less than 500,000.
The Act directs the Inspector General for the Treasury Department to monitor the disbursement and use of funds from the Coronavirus Relief Fund and directs the Treasury to book a debt owed to the Treasury from any State or local government in the amount of funds distributed to it under the Coronavirus Relief Fund that it has used improperly.
Potential direct assistance for small municipalities and counties
Wisconsin counties and municipalities with populations of less than 500,000 will not receive any direct aid from the Coronavirus Relief Fund. This oversight did not go unnoticed.
On April 7, 2020, a number of members of the House introduced the Coronavirus Community Relief Act (H.R. 6467). This new legislation would provide a $250 billion fund for local governments with populations under 500,000. Authorized uses of the Community Relief Fund mirror the authorized uses of the Coronavirus Relief Fund.
Stafford Rosenbaum LLP will provide additional information on the distribution of the Coronavirus Relief Fund as guidance becomes available. We will also continue to track developments regarding H.R. 6467. Please contact any member of Stafford Rosenbaum’s government law team with any questions, or call us at 608.256.0226.