The COVID-19 CARES Act is so involved, complex and voluminous that — just as the speaker of the U.S. House famously said of another bill a few years ago — Congress may have had to pass it to see what all was in it.
The relief package is broadly structured because the impacts of the virus are spread throughout the entire public and private sectors. In short, there is something in the act for nearly everybody.
The stimulus package also singles out two major sectors of the economy with grants and loans for agriculture and transportation.
Support for the energy sector in the bill is limited to small funding grants to research coronavirus within the Department of Energy and a smaller amount to the Nuclear Regulatory Commission. However, no funding has been allocated in the bill to the oil industry despite the fact that demand for fuels has been drastically reduced in part due to the impact of COVID-19 pandemic.
Finally, the bill provides grant money for low- and moderate-income households regardless of age or employment status. Most adults will receive $1,200 and dependent children are to receive $500.
It’s not possible to parse the entire 247-page act here, but let’s examine the primary ways it may assist state and local governments and the potential benefits that could accrue to the private sector in Wyoming.
One major provision reimburses state and local governments for unanticipated expenditures due to the COVID-19 outbreak. This program allots funding to each state somewhat according to population. Wyoming is allotted the minimum amount — $1.25 billion.
A number of conditions apply to this funding. First, the money can only be spent on costs incurred due to the virus pandemic. Second, the funds cannot be used to finance items that were part of an already approved budget. Finally, the reimbursable COVID-19 related expenditures must occur between March 1 and Dec. 30, 2020.
As in most emergency legislation, the devil is in the details. For instance the literal interpretation of the second condition is that if a state’s recently approved budget anticipated specific expenditures for virus related public services and were financed with other state funds, no stimulus payments could be substituted for these state dollars. In contrast, a state that adopted its budget with no associated COVID-19 consideration would qualify for full reimbursement. In other words, states that looked ahead and budgeted for the current crisis would be penalized for their foresight.
Another matter that demands clarity is to what extent federal stimulus funding can be used to replace tax revenues lost due to economic upheaval caused by the virus. The interpretation will be particularly critical in Wyoming, because the sudden drop in the state’s revenue is likely to far exceed its virus-related expenditures. Clearly, any budget overruns in the health department, for example could be remedied with state stimulus allocations. But if the state taps into rainy day funds to deal with plummeting revenues, which are in part caused by the coronavirus, will it be able to reimburse those expenditures with this relief program? The Legislature is likely already investigating this avenue through the state budget office.
Elsewhere in the bill are considerable funds for local governments. Billions are set aside to serve a multitude of local government needs that have emerged in connection with COVID-19 pandemic. Further, grants for community development and revitalization including housing, economic development, health facilities and child care facilities. States can also apply funds to local community health facilities that have experienced extraordinary virus-related expenses.
Many of these elements in the CARES Act will require state legislative appropriation decisions. It is certain that at least one special legislative session will be required soon to amend the budget perhaps for both this fiscal year and the next.
The act also expands unemployment insurance benefits by adding an additional month to the normal maximum of three months. Equally important, unemployment compensation is increased for all recipients by $600 per week. In addition to the increased benefit duration, this $600 weekly boost stands to bring in an additional $7,800 per recipient. That, plus the direct payments to nearly all households mentioned above will benefit the state by restoring consumer spending.
In addition, the act expands the list of those eligible for unemployment benefits to include the self-employed and certain other individual proprietors. A variety of training programs are included for workers displaced from their usual occupations, seniors, and a variety of other employment-challenged groups.
One of the most pressing issues that has arisen in Wyoming is the immediate financial stress experienced by small businesses whose vitality has been directly compromised by the virus. Some businesses have been closed by government order. Others have endured drastically reduced business volume because of public fear of spreading or contracting the disease. In Wyoming, small business is a fundamental economic foundation of communities across the entire state. The actual full impact will not be known for a considerable length of time.
Fortunately, there are numerous sections of the CARES Act dealing directly with small business assistance. It is critical that these benefits reach the targeted business population as soon as possible because ongoing fixed costs are often critically time-dependent.
The act makes emergency grants up to $10,000 available to small businesses through the Small Business Administration for immediate relief for operating expenses.
Also billions of dollars have been included for up to six months of debt payments and other expenses such as rent. There are also additional grant and load programs to be offered through the SBA.
In addition to grant programs, a large amount the total cost of the CARES Act is set aside for a lending fund to be accessed by the business sector and state and local governments. A total of $500 billion, nearly 25% of the act’s appropriation, is available to small- and medium-sized businesses. The uses of the loan proceeds are intentionally liberal and repayment terms can extend to up to 30 years. A potential applicant would need to study the various programs included within this section of the law. There are loans and loan forgiveness, tax deferrals and tax credits among other programs that together can be tailored to a wide variety of business challenges brought about by the pandemic.
Lodging establishments and other businesses that depend on the seasonal vacation travel industry will find these grant and loan programs critical for their long term viability. Travel businesses are especially vulnerable in the state, because the full brunt of impacts from the virus, arrives at a time of the year in which the industry is normally ramping up for the peak summer season.
The transportation sector is singled out for special assistance in the bill. The airline industry has been especially ravaged by the COVID-19 outbreak. Because of the complex world infrastructure of the industry, it is sure to continue into the indefinite future. Airlines are known for having high fixed costs, including debt service. The CARES Act addresses this issue directly. A total of $60 billion is to be channeled into this sector of the transportation industry. Lesser amounts address local transit system needs, airport improvements, and passenger railroads. Transportation is a crucial input to the Wyoming tourism industry. There are some elements of this section of the bill that will positively affect incoming visitors when the COVID-19 impact subsides.
Agriculture is another sector that is singled out in the Act. Some aspects of this section of the bill suggest somewhat of a pork barrel aura. Billions are to be used to enhance specialty food production such as fruits, vegetables and nuts. Money is also provided to promote specialized marketing such as farmers’ markets. Finally, several billion dollars are allocated for distribution in a manner similar to the subsidies granted during the recent trade war with China.
There are far more nuances and special programs in the CARES Act dealing with many segments of society that have not been touched upon here. It is evident that those who crafted the legislation were focused on a wide spectrum of the private sector as well as units of state and local government. Because of this, the administrative complexities are sure to be numerous and time delays are likely.
However, the need for a relief bill becomes even more ominous the longer this crisis extends. There are sure to be newly discovered tweaks needed in this act. And, it’s very likely Congress will determine that a second relief measure will be needed soon.