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Treasury Department releases guidance for state and local governments for CARES Act

Jennifer Burnett
Treasury Secretary Steven Mnuchin has released guidance for State, Local, and Tribal Governments regarding the Coronavirus Relief Fund.

The CARES Act, signed by President Trump on March 27, includes a $150-billion Coronavirus Relief Fund to provide direct assistance to state and local governments in response to COVID-19. The Congressional Research Office has estimated that the State of Kentucky’s allocation will be approximately $1.7 billion. 

The Act requires that the use of funds be “necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19)”.

States can transfer funds to counties

The new guidance makes clear that a state may transfer funds to a local government, provided that the transfer qualifies as a necessary expenditure incurred due to the public health emergency. States are not, however, required to share funds with local governments. KACo and the Kentucky League of Cities have sent a letter to Governor Beshear requesting that counties and cities have a seat at the table as the state determines how best to use the $1.7 billion allocated to Kentucky. The Governor has stated publicly that counties and cities need direct financial assistance. 

Expenditures covered  

Costs must be incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.

Funds may be used to reimburse expenses incurred responding directly to the COVID-19 emergency, such as by addressing medical or public health needs, as well as expenditures incurred to respond to second-order effects of the emergency, such as by providing economic support to those suffering from employment or business interruptions due to COVID-19-related business closures.

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.

The statute also specifies that expenses must be “necessary,” which the Department of the Treasury understands to mean that the expenditure is reasonably necessary for its intended use in the reasonable judgment of the government officials responsible for spending Fund payments.

In addition to medical and public health expenses, including the purchase of PPE, eligible expenses could include:

  • Food delivery to vulnerable populations
  • Expenses to improve telework capabilities for public employees
  • Paid sick and paid family and medical leave to public employees
  • COVID-19 related expenses of maintaining county jails
  • Care for homeless populations provided to mitigate COVID-19 effects
  • Grants to small businesses to reimburse the costs of business interruption caused by required closures

The CARES Act requires that payments be used only to cover costs that were not accounted for in the budget most recently approved as of March 27, 2020.

Additional guidance

The guidance document (HERE) and frequently asked questions (HERE) provide, in detail, examples of eligible and ineligible expenditures of the Relief Fund. You can find additional information about assistance to state and local governments HERE.

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