The House of Representatives on March 27 passed the Coronavirus Aid, Relief, and Economic Security (CARES) Act in response to the COVID-19 pandemic and President Donald Trump signed the bill into law the same day.
The measure will provide $2 trillion in financial assistance in response to the pandemic.
The Senate passed the measure on March 26.
Details on provisions of the CARES Act
The CARES Act provides $900 million for the Low Income Home Energy Assistance Program (LIHEAP), which comes in addition to the $3.74 billion already appropriated for the account for fiscal year 2020.
The act also provides that the additional funds could be spent through fiscal year 2021, but the National Association of Energy Assistance Directors estimates that additional funds will be nowhere near enough to meet additional demands in the current fiscal year let alone last into the next.
As Congress moves to respond to the COVID-19 pandemic, additional funding for LIHEAP has been a key priority for the American Public Power Association.
Representatives and Senators recently argued that the allocation of additional funding for LIHEAP was warranted, given that the pandemic is expected to result in widespread financial distress and a spike in unemployment.
In addition, the CARES Act allows employers, including governmental employers, to defer payment of the employer share of the Social Security tax they otherwise are responsible for paying to the federal government with respect to their employees. The delay applies to payments due after the date of enactment and before January 1, 2021.
Employers generally are responsible for paying a 6.2-percent Social Security tax on employee wages. The provision requires that the deferred employment tax be paid over the following two years, with half of the amount required to be paid by December 31, 2021, and the other half by December 31, 2022.
Meanwhile, most Indian Tribes and governmental entities do not pay per-worker unemployment taxes. Instead they have “reimbursable arrangements” with state unemployment programs, which require them to reimburse the state for 100 percent of the cost of unemployment compensation paid to their furloughed or laid off workers.
Under the CARES Act, the federal government will pay 50 percent of the reimbursement for unemployment compensation paid from March 13, 2020 (when the President first declared the pandemic to be a national emergency), through December 31, 2020.
Economic Stabilization Fund
The pandemic and the resulting economic downturn mean that access to lending will be incredibly difficult and/or costly for many borrowers, including for some public power utilities.
The CARES Act is intended to provide some relief by authorizing $500 billion to be used for direct lending, loans, and loan guarantees to business, states and municipalities. Specifically, these provisions are intended to provide liquidity to eligible businesses, states, and municipalities related to losses incurred as a result of coronavirus, throughout the pandemic.
The CARES Act states that the Treasury Department will “endeavor to seek the implementation of a (loan) program or facility … that provides liquidity to the financial system that supports lending to States and municipalities.”
Another section of the CARES Act provides $150 billion to be distributed by the Secretary of Health and Human Services (HHS) to states and local governments.
Qualifying uses for such funds include only necessary expenditures incurred due to the COVID-19 pandemic between March 1, 2020, and December 31, 2020 and which had not previously been budgeted for by the requesting state or local government.
Requests for funding can be made by the state or local governments, although the total amount allocated to a state is limited by formulas included in the Act.
Also, only larger “units of local governments” are allowed to make a direct request for aid. Specifically, only a “county, municipality, town, township, village, parish, borough, or other unit of general government below the State level with a population that exceeds 500,000.”
HHS is required to release funds within 30 days of enactment.
FEMA to receive additional $45 billion
President Trump has declared a national emergency for the entire nation and made major disaster designations related to the COVID-19 pandemic in nine states including New Jersey, North Carolina, Texas, Florida, Louisiana, Iowa, California, Washington and New York. These designations date back to January 20. Additional major disaster designations are expected in the days and weeks to come.
Generally, these major disaster designations have authorized reimbursements for Category B – Emergency Protective Measures. A variety of utility-related expenditures should qualify, including labor costs, equipment use and supplies.
To pay for these and other COVID-19 related costs, the CARES Act appropriates an additional $45 billion for the Federal Emergency Management Agency.
CARES Act does not allow state, local government employers to qualify for payroll tax credit
At the same time, the bill does not allow state and local government employers to qualify for the payroll tax credit provided in the Families First Coronavirus Response Act (FFCRA). This credit was intended to offset the cost of providing emergency paid sick leave and paid family medical leave, but governmental employers are specifically excluded from benefiting.
Gaining access to this credit was a top priority for the American Public Power Association and had been included in a House Democratic version of the bill.
FFCRA creates Paycheck Protection Program
A key issue for public power during the pandemic is the ability of financially stressed customers to pay their bills. Small businesses may be especially hard hit, facing reduced demand for their goods and services and possibly few reserves to pay ongoing costs.
To help these small businesses, the FFCRA creates the Paycheck Protection Program, which authorizes up to $349 billion for new small business loans. These loans are available at low rates and for up to 10 years.
While wages are one qualifying purposes for these loans, another qualifying purpose is electric utility payments.
Additionally, these loans will be forgiven insofar as the small business can document that have used these funds for these qualifying purposes.
Coronavirus Preparedness and Response Supplemental Appropriations Act
Meanwhile, a third measure, the Coronavirus Preparedness and Response Supplemental Appropriations Act (H.R. 6074) that was enacted on March 6 provided $8 billion in emergency supplemental spending to aid in the response to the pandemic.