CARES Act CRF Update

6 Jul 2020, by Seth Grigg Share :

Last week county officials participated in two separate conference calls with staff from the Governor’s Office to discuss questions related to implementation of the Governor’s proposal to leverage Coronavirus Relief Funds to cover payroll expenses for public safety and public health personnel (known as the Idaho Local Public Safety Initiative). Due to questions raised by IAC members, IAC is working with the Governor’s Office and Senator Crapo (who chairs the Senate Banking Committee and works closely with US Treasury) to seek clarification on the following issues.

Issue 1: May CARES Act funds be used to cover payroll expenses for public safety and public heath personnel even if those expenses were included in the current year budget?

The CARES Act establishes that payments form the Coronavirus Relief Fund may only be used for expenditures that were:

1.     Incurred due to the COVID-19 public health emergency,

2.     Not accounted for in the government’s most recently approved budget, and

3.     Incurred between March 1, 2020 and December 30, 2020.

Subsequent answers from the US Treasury have clarified that:

As matter of administrative convenience in light of the emergency nature of this program, a State, territorial, local, or Tribal government may presume that payroll costs for public health and public safety employees are payments for services substantially dedicated to mitigating or responding to the COVID-19 public health emergency, unless the chief executive (or equivalent) of the relevant government determines that specific circumstances indicate otherwise (see page 1, question 2 of the FAQs).

The US Treasury has also clarified that:

As a matter of administrative convenience, the entire payroll cost of an employee whose time is substantially dedicated to mitigating or responding to the COVID-19 public health emergency is eligible, provided that such payroll costs are incurred by December 30, 2020 (see page 9, question 9 of the FAQs).

The Governor’s Office interprets these two clarifications to authorize a city or county to receive reimbursement for payroll expenses of public safety and public health personnel. Given this interpretation, IAC has specifically requested an answer to the following question:  does the CARES Act allow the State to reimburse a local government’s entire public safety and public health payroll expenses even if they were included in the budget most recently adopted budget by the local government?

Issue 2: Does the Governor’s plan amount to revenue replacement?

Guidance issued by the US Treasury specifically states that:

Funds may not be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the statute.  Although a broad range of uses is allowed, revenue replacement is not a permissible use of Fund payments.

Additionally, the US Treasury has clarified through subsequent FAQs that:

Fund payments may not be used for government revenue replacement, including the provision of assistance to meet tax obligations (page 5, question 4 of the FAQs). 

The Governor’s Office views the proposal as a mechanism to provide funding to cities and counties for public safety and public health payroll expenses. In order to prevent a revenue surplus, the Governor’s Office is allowing cities and counties to opt into the program on a voluntary basis. In order to opt into the program, a city or county must commit to reducing the amount of property taxes that the city or county budgets. Given this interpretation, IAC has requested guidance from the US Treasury and Governor’s Office regarding whether or not a state can make an additional allocation of Coronavirus Relief Funds available to local governments on a voluntary basis conditioned upon a local government both not increasing its property tax budget (by not taking the 3%) and reducing its total levied amount of property taxes by the amount of the allocation made available by the state.

Issue 3: Does the Governor’s proposal meet US Treasury guidance?

Several county officials have raised concerns about liability that a county may incur if it participates in the program. While the Governor has indicated that the State is responsible for repaying CARES Act funds expended outside of US Treasury guidance, questions about county liability remain. To assist in this, IAC has also requested that the US Treasury clarify whether or not the proposal meets the guidelines for CARES Act expenditures.

IAC recognizes there is a very short window for answers to these questions to be provided. We are working through multiple channels to request additional guidance be issued in a timely manner. We’ll continue to provide new information as it becomes available. Please don’t hesitate to reach out with questions.