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Sharing is Caring: The Federal CARES Act and Local Governments


May 7, 2020 by Linda Gallagher
Category: Revenues , COVID-19

Sharing is Caring: The Federal CARES Act and Local Governments

Editor's notes:

  • This article provides a broad overview of the CARES Act. For more detailed information on the local government Coronavirus Relief Funds, including the grant process, how funds will be disbursed, eligible expenses, and federal auditing standards, see our May 19 blog post Cities, Towns, Counties to Receive CARES Act Funds.
  • On May 28, after these articles were originally published, the U.S. Treasury Department updated its Frequently Asked Questions guidance for local government on CARES Act Coronavirus Relief Funds to clarify the distribution of funds by the states to local governments below 500,000 population. The update states that 45% of the funds received by the state should be shared with local governments under 500,000 population, provides additional guidance on use of funds for public health and public safety payroll costs, and clarifies the federal auditing standards for these funds. For more information on these FAQ updates, see Pacifica Law Group's summary.

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted March 27, 2020, to provide immediate relief in response to the COVID-19 pandemic and its unprecedented economic impacts. This article provides an overview of the CARES Act as it applies to the needs of local governments. 

Programs

The CARES Act provides more than 2.2 trillion federal dollars for new and existing programs for individual taxpayers, small and large businesses, health care systems, nonprofits, tribal governments, and others, including state and local governments. This Act includes the following programs:  

  • Keeping Americans Paid and Employed Act (Title I)
  • Assistance for American Workers, Families, and Businesses (Title II)
  • Supporting America’s Health System in the Fight Against the Coronavirus (Title III)
  • Economic Stabilization and Assistance to Severely Distressed Sectors of the United States Economy (Title IV)
  • Coronavirus Relief Funds (Title V)

Assistance for workers, small businesses and others

Direct relief for workers and small businesses includes the Payroll Protection Program (PPP) for small businesses, eligible nonprofit organizations, veterans’ organizations, tribal businesses described in the Small Business Act, and individuals who are self-employed or are independent contractors. PPP loans are not available to local governments such as counties, cities, towns, and special purpose districts. Of course, communities still benefit directly and indirectly when their local businesses and residents are helped to survive through this crisis.

Temporary tax relief for individuals also includes a waiver of the additional 10% tax for COVID-19 related early withdrawals from IRA and 401(k) accounts and relief from the requirement to withdraw a minimum required distribution (MRD) from these accounts in 2020 (for those over age 70.5 years).

Other CARES Act relief programs include Access to Health Care for COVID-19 Patients, Support for Health Care Workers, Coronavirus Economic Stabilization Act of 2020, Economic Disaster Relief, and Treasury Loans.

State and local governments coronavirus relief fund

The CARES Act provides a $150 billion fund distributed to the 50 states, the District of Columbia, tribal governments, and territories. Distributed by the U.S. Treasury, these funds are for necessary expenditures incurred in responding to the coronavirus outbreak. The allocation of funds is based on population, and every state is guaranteed at least $1.25 billion. Forty-five percent (45%) of each state’s total allotment is reserved for “units of local government” defined as having a high threshold population of 500,000 or more (based on the most recent U.S. Census figures from 2010). So, in our state, the City of Seattle and King and Snohomish Counties are eligible for funds directly from the Treasury Department.

Expenditures eligible for this relief are required to be:

  1. “Necessary expenditures” related to COVID-19;
  2. Not accounted for in the most recently adopted budget as of March 27, 2020, which is the CARES Act enactment date; and
  3. Expenses incurred between March 1, 2020 and December 30, 2020.

There is not a provision requiring states to distribute funds to their local governments with less than 500,000 population. The good news in Washington State is that the state government is sharing a generous portion of its CARES Act funds with all Washington cities, towns, and counties. This substantial relief will help local governments continue to deliver essential and important services needed to respond to the COVID-19 pandemic.

According to Governor Inslee’s April 27 press release:

Funds will be provided to cities and counties with populations under 500,000 that were ineligible to receive direct funding under the CARES Act. Specific allocations will be released in the coming days. Each county will receive a minimum distribution of $250,000 and each city will receive a minimum distribution of $25,000...

Additionally, the press release notes: 

Under state law, the Legislature must be notified about the awards and be given 10 days to respond before the distributions are made. During that time, the state will work with local governments to get the agreements in place so they can put the money to work as soon as possible.

MRSC plans to provide details of this program as these become available.

On April 22, the U.S. Treasury Department issued guidance for state, territorial, local and tribal governments regarding the CARES act and subsequently issued an FAQ to supplement this guidance on May 4.

Documentation

As you know, it is crucial to accurately and thoroughly document your COVID-19 related expenditures and their necessity.  Documentation is also useful in case of future benefits programs, such as those mentioned below.  

Unemployment relief

In Section 2103, the CARES Act has a provision called “Emergency Unemployment Relief for Governmental Entities and Nonprofit Organizations.” Under this program, nonprofits, Indian Tribes, and governmental entities may seek a 50% reduction in reimbursements they are required to pay the state for benefits paid to workers who claim unemployment assistance. There are also provisions that provide flexibility for employers in making these reimbursement payments.

Other CARES Act relief

According to the CARES Act Summary, other programs and appropriations in the CARES Act that will certainly benefit local and state governments, at least indirectly, include substantial funding for transportation, airports, and essential air service — including rural air service, rail, and transit. Increased funding is also included for nutrition assistance and food banks, COVID-19 testing, health care, personal protective equipment (PPE), homeland security and the department of defense.

More Help on the Horizon

The CARES Act is meant to provide immediate emergency relief. Congress has already appropriated additional funds to the Paycheck Protection Program, and more proposed relief is likely to provide further economic assistance. Congress is considering H.R. 6467, the Coronavirus Community Relief Act, which includes relief provisions specifically for local governments, and the Federal Reserve is creating a Municipal Liquidity Facility with up to $500 billion in loans to help state and local governments manage cash flow stresses due to the COVID-19 pandemic.

Washington State’s support of our local governments is robust and provides resources to promote public health and safety as well as economic health and survival. Continue to consult your agency’s attorneys for legal advice on specific situations, and at MRSC, we are here to help with general guidance. Please continue to share your solutions, your sample policies, and other COVID-19 related documents with us. Sharing is caring.

Resources

MRSC offers several resources for local governments, including:

Additional resources are below. 

And finally, the U.S. Treasury Department offers two documents specific to the CARES Act. 


MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.

About Linda Gallagher

Linda Gallagher joined MRSC in 2017. She previously served as a Senior Deputy Prosecuting Attorney for King County and as an Assistant Attorney General.

Linda’s municipal law experience includes risk management, torts, civil rights, transit, employment, workers compensation, eminent domain, vehicle licensing, law enforcement, corrections, and public health.

She graduated from the University of Washington School of Law.

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