Understanding the CARES Act

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law on March 27th, 2020 (P.L. 116-136).  This over $2 trillion economic relief package is designed to mitigate the many public health and economic impacts of COVID-19. The Act funds a wide array of programs to help individuals, families, non-profits, and private sector employers, including small businesses generally and certain targeted industries or sectors, such as aviation and farming.

The CARES Act also affects state, local, territorial, and tribal (SLTT) governments either through assistance to their activities or through grant funds that are funneled through the SLTT community. Now that the CARES Act has been in play for over a month, here is what we know about how the act is being utilized to assist communities across the county:

Repurposing Funds. Across the federal government, The Office of Management and Budget (OMB) has authorized federal awarding agencies to facilitate repurposing grant funds to address coronavirus needs. Many agencies and programs are implementing that flexibility and issuing grant-specific guidance and processes.

Financial Stability. Central to CARES Act assistance to governments is the Coronavirus Relief Fund (Title VI), a $150 billion appropriation distributed on a formula basis as grants to states, Tribes, territories, the District of Columbia, and local governments. The money is intended to help these entities address the extra, unbudgeted expenditures that they have undertaken in order to combat the pandemic.

Aside from that program, Title IV of the CARES Act establishes a $500 billion fund through which the Treasury can make loans, loan guarantees, and other investments to shore up states, municipalities, and eligible businesses like airlines or businesses “critical to maintaining national security.”

Healthcare. The Act reauthorizes and allocates funding to public health programs, including grants for rural providers (non-profits or public) and the Hospital Preparedness Program. It allows states to use funds provided under the Older Americans Act in order to provide meals to individuals homebound due to social distancing. It also modifies some Medicare and Medicaid provisions in order to provide flexibility to operations and increase support to workers and availability of care. Finally, the Act allows for a temporary increase in the Federal Medical Assistance Percentages (FMAP) funds provided to states and territories.

The Centers for Disease Control and Prevention (CDC) is appropriated at least $1.5 billion for grants to support preparedness and response activities by states, Tribes, and certain health providers. Other HHS components have increased funds available and implemented flexibilities related to grant spending.

Unemployment Insurance. Title II.A, administered by the Department of Labor, provides a number of authorities related to unemployment insurance that can impact the State’s expenditures. For example, Section 2103 allows the federal government to transfer funds to states for partial reimbursement of amounts paid into the State unemployment fund by governmental (and certain not-for-profit) organizations. Section 2105 allows for full federal funding of a person’s first week of unemployment claims, subject to certain conditions. Federal funding is also offered to help offset other specific unemployment programs, each with specific funding levels and criteria. Section 2106 provides flexibility in surging staff to process claims. And finally, this is an example of one of the areas where extra funds are provided for state administrative costs.

Transportation. The Department of Transportation is appropriated $36 billion to provide grants and other assistance to public-use airports and transit systems (“Transit Infrastructure Grants”).

Education. The Department of Education oversees a $31 billion appropriation that, in part, provides grants to states and local education agencies to stabilize their finances. The funds support grants for local education agencies (elementary and secondary), which are routed through the state as grantee, and for institutions of higher education through a mix of grants routed through the states and grants issued directly by the Department.

Homeland Security. The Department of Homeland Security is given funds to purchase PPE and sanitization materials for distribution to the Nation. Also, FEMA receives funds for their Assistance to Firefighter Grants and Emergency Management Performance Grants programs.

Tribal Support. Both the Department of the Interior and Health and Human Services are appropriated substantial funds to render support to Native American / First Nations Tribes largely through expansion of existing programs. Once the Bureau of Indian Affairs’ guidance is finalized it should appear here.

Housing and Antipoverty. HHS is administering supplemental appropriations from the Act for programs such as low-income energy assistance, Community Services, Block Grants, and the Child Care and Development Block Grants. HUD is administering additional funds in a variety of its programs ranging from rental assistance to public housing to Community Development Block Grants. The Act prescribes a number of changes to how these specific funds are administered.

Other Supplemental Appropriations. The Act includes supplemental appropriations for dozens of other agency components or programs (Division B). Most of the line items cover the agency’s own increased cost of operation, but there are some cases where the funds flow to the state/local level. The Supplemental Nutrition Assistance Program (SNAP) and Election Security Grants are examples.

It’s also worth noting that the Congressional Budget Office (CBO) analysis of the CARES Act highlighted one provision that imposes a mandate whose costs for state and local entities might, in CBO’s view, be significant:

“Section 3605 extends a requirement for state and local governments to provide paid family and medical leave to employees who were laid off after March 1, 2020, and later rehired. CBO expects that a small portion of the 18 million employees who have applied for unemployment benefits between early March and April 4, 2020, are eligible for the paid-leave benefit.”

Federal agencies have been rapidly developing or revising processes and program rules related to CARES Act funds, to support distributing moneys as expeditiously as possible. The CARES Act is the third major relief bill that congress has passed in an effort to assist the nations economy. As more developments are made and new legislation has passed IEM will provide you with the necessary information and guidance to stay up-to-date on the evolving situation.

IEM can help state, local, territorial, and tribal governments navigate these processes and fully leverage the resource opportunities that the CARES Act makes available. Please contact us to learn more.