Time Delays and Lack of Guidance Complicating Local CARES Act Relief

When the history of the COVID-19 pandemic is ultimately written, there will likely be a chapter addressing how the impact of a well-intentioned federal relief package called the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) was somewhat hobbled by its roll-out and the ultimate disbursement of public assistance.

As one example, in early June, in an effort to help its residents manage the initial stages of the pandemic’s effect on the economy, Florida’s Orange County government created a program designed to allocate over 60 percent of its CARES Act funds to provide direct grant payments to small businesses and families.[1] On June 8, 2020, just minutes after the county had first opened the application portal for families to apply for the federal money, the system was overwhelmed and had to be shut down. As of that same day, 55 of Florida’s 67 counties had still not received their share of federal stimulus funds authorized in the CARES Act, and much of the state had been nearly completely shut down for more than two months, causing long-lasting damage to Florida’s businesses and families.

In the months since the CARES Act passed in late March 2020, a mix of confusion over spending guidance and time delays in disbursements have marred the economic recovery efforts in counties across Florida, leading to a complex patchwork of local relief measures in response to the ever-expanding COVID-19 pandemic.

When Congress passed the $2 trillion CARES Act on March 27, 2020, the federal government stipulated that counties with populations over 500,000 would receive direct payments. For the remaining counties, the state government had discretion over how to allocate the leftover aid money. Twelve Florida counties with populations greater than 500,000—Brevard, Broward, Duval, Hillsborough, Lee, Miami-Dade, Orange, Palm Beach, Pasco, Pinellas, Polk, and Volusia—were the first to receive federal CARES Act, to the tune of $2.472 billion in direct aid.[2] Another $1.275 billion in local aid was directed to the state government to be released to smaller counties at its discretion.

More than two months after the twelve largest counties received CARES Act funding, Governor Ron DeSantis announced that the state would begin disbursing the $1.275 billion in federal aid to the remaining counties and directed the Florida Division of Emergency Management (DEM) to implement a phased approach whereby an initial disbursement of 25 percent of each county’s allocation would be released followed by successive payments in the future. For county governments to receive the allocation, they must agree that:

1. The County will use the fund disbursement on eligible expenditures as defined by the CARES Act, and related guidance from the U.S. Department of the Treasury [emphasis added];
2. The County agrees to repay the state of Florida any portion of the disbursed funds that is unused, or is not utilized in accordance with the CARES Act stipulations; and
3. The County agrees to submit quarterly reports to DEM detailing the expenditure of disbursed funds as well as projections of eligible expenditures.[3]

Even after this process was in place, issues persisted for the 55 smaller counties in receiving their share of CARES Act relief funds. Specifically, as the above stipulations suggest, local governments are to use disbursements in accordance with “eligible expenditures” as defined in the CARES Act; however, what constitutes an eligible expenditure has led to further complications as local governments have navigated the constantly changing landscape of federal guidance.

According to the U.S. Department of Treasury’s guidance, the CARES Act fund payments may only be used to cover costs that:

1. are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19);
2. were not accounted for in the budget most recently approved as of March 27, 2020 (the date of enactment of the CARES Act) for the state or government; and
3. were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.[4]

Once again, what exactly constitutes a “necessary expenditure” led to widespread confusion and repeated updates to the federal guidance. As of the June 30 guidance, the Treasury notes that necessary expenditures include not only direct expenditures addressing medical or public health costs, but also “second-order effects of the emergency,” including, but not limited to providing economic support to those suffering from employment or business interruptions.

Below are some nonexclusive examples of eligible expenditures:[5]

1. COVID-19 related expenses of public hospitals, clinics, and similar facilities
2. Costs of providing COVID-19 testing, including serological testing
3. Expenses for acquisition and distribution of medical and protective supplies
4. Expenses for disinfection of public areas and other facilities, e.g., nursing homes, in response to the public health emergency
5. Payroll expenses for public safety, public health, health care, human services, and similar employees whose services are substantially dedicated to mitigating and responding to the COVID-19 public health emergency
6. Expenses to facilitate distance learning in connection with school closings or to improve telework capabilities for public employees
7. Expenses related to the provision of grants to small businesses to reimburse the costs of business interruption caused by required closures.

Below are some nonexclusive examples of ineligible expenditures:

1. Expenses for the state share of Medicaid
2. Damages covered by insurance
3. Payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating or responding to the COVID-19 health emergency
4. Expenses that have been or will be reimbursed under any federal program, such as the reimbursement by the federal government of contributions by states to state unemployment funds
5. Reimbursement to donors for donated items or services
6. Workforce bonuses other than hazard pay or overtime
7. Severance pay
8. Legal settlements

Even with these guidelines, there are many nuances within the federal guidance. For example, recipient governments may use the money to prevent eviction and assist in preventing homelessness; however, the money may not be used to assist impacted property owners in paying local property taxes. In another example, fund payments cannot be used for capital improvement projects; however, payments can be used for the establishment of temporary public medical facilities. In addition, recipient governments can use aid money to expand rural broadband capacity to assist with distance learning and telework. But if projects are not expected to “increase capacity to a significant extent until the need for distance learning and telework have passed due to this public health emergency,” they would not be eligible for payments.[6]

Across Florida, counties are increasingly using federal CARES Act money to assist in the “second-order effects” that federal guidance stipulates. Orange County’s program mentioned above was well-intentioned, but almost instantly overwhelmed. In smaller counties, such as along Florida’s Treasure Coast, county leaders are dedicating aid money to assist coastal small businesses affected by the subsequent decline in tourism. In Okeechobee County, one of Florida’s more rural counties, the county is providing one-time direct payments to businesses to cover wages, bills and rent, and other business expenses.[7]

It remains to be seen whether Congress and the federal government plan to initiate negotiations for further rounds of COVID-19 relief for state and local governments. As the past few months have shown, for many of Florida’s local leaders, navigating the complex set of CARES Act guidelines has been difficult and confusing at times, exacerbated by the fact that most of the state’s counties received federal money months after the most populous counties. Moving forward, maintaining a clear set of federal guidelines and providing transparency and expediency in the state disbursement process will be essential to counteracting the economic downturn brought on by the pandemic.