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Thursday, April 30, 2020

Treasury Department Issues Coronavirus Relief Fund Guidance

The CARES Act established a $150 billion Coronavirus Relief Fund (Fund) for states and eligible local governments with more than 500,000 in population. The State of Illinois, the City of Chicago, and Cook, DuPage, Kane, Lake, and Will counties will be the direct recipients for the Fund in Illinois. Small and mid-size local governments are watching to see if there will be other federal relief, or if any Coronavirus Relief Funds will pass through to them from the direct recipients. Meanwhile, the Treasury Department recently issued guidance to direct recipients last week that provides guidance on how pass-through funds might be used.

Payments from the Fund can only be used to cover costs that: (1) are necessary expenditures incurred due to the COVID-19 public health emergency; (2) were not accounted for in the budget most recently approved as of March 27, 2020 for the state or local government; and (3) were incurred during the period that begins on March 1, 2020 and ends on December 30, 2020.

Necessary Expenditures Incurred Due to the COVID-19 Public Health Emergency

The Department broadly interprets the term “necessary” to mean expenditures reasonably necessary for their intended uses in the reasonable judgment of government officials responsible for spending Fund payments. The Department cautions that funds cannot be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the CARES Act.

Costs Not Accounted for in the Budget Most Recently Approved as of March 27, 2020

The “most recently approved” budget means the enacted budget for the local government’s relevant fiscal period, without taking into account subsequent supplemental appropriations enacted or other budgetary adjustments made in response to the public health emergency. A cost is not considered “accounted for” in a budget simply because it could be met using a budgetary stabilization fund, rainy day fund, or similar reserve account.

Costs Incurred from March 1, 2020 through December 30, 2020

A cost is “incurred” when an eligible local government expends funds to cover the cost.

Examples of Eligible Expenditures

Medical Expenses 
  • Expenses of public hospitals, clinics and similar facilities.
  • Expenses of establishing temporary public medical facilities and other measures to increase treatment capacity, including related construction costs.
  • Costs of providing COVID-19 testing, including serological testing.
  • Emergency medical response expenses, including emergency medical transportation related to COVID-19.
  • Expenses for establishing and operating public telemedicine capabilities for COVID-19 related treatment.

Public Health Expenses
  • Expenses for state and local governments to communicate and enforce COVID-19 related public health orders, including quarantining individuals.
  • Expenses for acquiring and distributing medical and protective supplies for first responders, social workers, child protection services and child welfare officers, direct service providers for older adults and individuals with disabilities in community settings, and other public health and safety workers.
  • Expenses for disinfecting public areas and other facilities and undertaking other public health measures.
  • Expenses for technical assistance to local authorities and other entities for mitigating COVID-19 related threats to public health and safety.

Payroll Expenses
  • Expenses for public health and safety, health care, human services, and similar employees whose services are substantially dedicated to mitigating or responding to the COVID-19 public health emergency.

Expenses to Facilitate Compliance with Public Health Measures, such as:
  • Expenses for food delivery to residents, senior citizens and other vulnerable populations.
  • Expenses to facilitate distance learning and technological improvements in connection with school closings.
  • Expenses to improve telework capabilities for public employees.
  • Expenses of maintaining sanitation and improving social distancing in state prisons and county jails.
  • Expenses to care for homeless populations.

Expenses Associated with Providing Economic Support, such as: 
  • Expenditures for providing grants to small businesses to reimburse the costs of business interruption caused by required closures.
  • Expenditures related to a state and local government payroll support program.
  • Unemployment insurance costs related to the COVID-19 public health emergency if such costs will not be reimbursed by the federal government. 

Any other COVID-19-related expenses reasonably necessary to the function of government that satisfy the Fund’s eligibility criteria.

Examples of Ineligible Expenditures

Ineligible expenditures include:
  • Expenses for the state share of Medicaid.
  • Damage covered by insurance.
  • Payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating or responding to the COVID-19 public health emergency.
  • Expenses that have been or will be reimbursed under any federal program.
  • Reimbursement to donors for donated items or services.
  • Workforce bonuses except overtime or hazard pay.
  • Severance pay.
  • Legal settlements.

While the availability of pass-through funds is uncertain, all local governments should keep track of all of their COVOD-19 expenses so they are prepared to apply for possible relief from the Coronavirus Relief Fund or other sources.

Post authored by Eugene Bolotnikov and Daniel J. Bolin, Ancel Glink


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