President Signs $2.2 Trillion CARES Act

Public Finance Alert

Last week, following approval in the House and the Senate, President Donald Trump signed the Coronavirus Aid, Relief, and Economic Stabilization Act (or CARES Act) into law. The Act is slated to provide $2.2 trillion worth of relief to Americans and the U.S. economy amid the COVID-19 pandemic. The CARES Act is the third – and most expensive – action taken by Congress to date to address costs associated with the rapidly expanding pandemic. While the CARES Act has a hefty price tag, it fails to fully address many needs, including the needs of state and local governments which are experiencing increased costs and declining revenues while battling on the frontlines of the pandemic. As such there is a growing expectation that Congress will need to consider a fourth round of funding to more specifically address these shortfalls.  Nevertheless, the infusion of funding from the CARES Act is an important, historic step in responding to the pandemic by providing expanded and extended unemployment benefits, tax rebates and other spending critical to addressing the economic slowdown resulting from the unprecedented “stay at home” and “shelter in place” orders in effect in cities and towns across the country.

The following is a short summary of certain key provisions of the CARES Act with a focus on the municipal finance industry and funding for state and local governments:

  • $500 billion for loans, loan guarantees, and other investments in accordance with the provisions of the Federal Credit Reform Act of 1990 in support of eligible businesses, states, municipalities, and their instrumentalities.[1] Of that $500 billion, $454 billion shall be available to make loans, loan guarantees, and other investments in programs or facilities established by the Board of Governors of the Federal Reserve System for the purpose of providing liquidity to the financial system that supports lending to eligible businesses, States, or municipalities by purchasing obligations or other interests directly from issuers (or that are in secondary markets) or for making loans, including loans or other advances secured by collateral.[2]
  • $150 billion established in a new “Corona Virus Relief Fund” to provide direct financial assistance to states, tribal governments, and units of local government to be spent on activities directly related to COVID-19.[3] These monies will be apportioned based on the population of each individual unit of local government, with each state receiving at least $1.25 billion.[4] An undefined amount will also be apportioned to reimburse the unemployment funds of state governmental entities.[5]
    • $3 billion of the “Corona Virus Relief Fund” will be dedicated to the District of Columbia, the Commonwealth of Puerto Rico, the United States Virgin Islands, Guam, the Commonwealth of the Northern Mariana Islands, and American Samoa.
    • $8 billion of the “Corona Virus Relief Fund” will be dedicated to Tribal Governments. Indian tribes are also eligible to receive a portion of $453 million for the “Operation of Indian Programs,” $69 million for the “Operation of Indian Education Programs,” $1+ billion for “Indian Health Services,” and $1+ billion for “Tenant-Based Rental Assistance” for Indian Housing. $300 million is also dedicated to “Native American Programs” such as the Indian Community Development Block Grant program.
  • $31 billion to the Education Stabilization Fund to provide monies to States to provide emergency support through grants to local educational agencies that the State deems to have been most significantly impacted by COVID-19 to support the ability of such local educational agencies to continue to provide educational services to their students, and other services such as child care, early childhood education, socialand emotional supports, the protection of education related jobs, and to support the on-going functionality of the local educational agency.[6] States must apply for these monies and be accepted by the Secretary of the Treasury.[7]
  • $25 billion in “Transit Infrastructure Grants” to be administered pursuant to Federal Transit Administration formulas for state and local transit agencies.[8]
  • $10 billion for “Grants-In-Aid for Airports” to prevent, prepare for, and respond to COVID-19. These funds shall be available for any purpose for which airport revenues may lawfully be used but may not be used for any purpose not directly related to the airport.[9]
  • $1.5 billion for state and local public health preparedness and response.
  • $1.5 billion in economic development grants for economic injuries incurred by state and local governments as a result of the pandemic.

The summary above is not exhaustive and simply focuses on certain key provisions affecting the municipal finance industry and funding for state and local governments. A complete version of the CARES Act is available as a PDF here.

Orrick continues to monitor and review Congressional activity, as well as other matters related to COVID-19 and will continue to provide additional client alerts and updates as circumstances warrant. Additionally, Orrick is prepared to help clients navigate through this legislation and apply for and leverage or otherwise help clients use stimulus monies provided in the CARES Act.

For more additional information please contact your Orrick Public Finance Attorney.

[1] Final Version of CARES Act, p. 512.

[2] Final Version of CARES Act, p. 513-514.

[3] Final Version of CARES Act, p. 602.

[4] Final Version of CARES Act, p. 603.

[5] Final Version of CARES Act, p. 96-98.

[6] Final Version of CARES Act, p. 757-759.

[7] Final Version of CARES Act, p. 757.

[8] Final Version of CARES Act, p. 842.

[9] Final Version of CARES Act, p. 835-836.