On July 27 U.S. Senate Majority Leader Mitch McConnell (R-KY) unveiled the details of the next coronavirus relief package the chamber is expected to work on – the Health, Economic Assistance, Liability Protection and Schools (HEALS) Act. Given that the House has already passed its version of their relief package (the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act) in May, Monday’s release established the Senate GOP’s starting point for negotiations. And although negotiations are just getting underway, there is less than two weeks left before the Senate is expected to adjourn for the August recess BEGINNING August 10.
The stage is set for what could be a flurry of negotiations over the next two weeks with the House, Senate and White House finding an agreement just as both chambers begin their recess. While not covering all provisions, below is a quick overview to highlight some of the differences between each chamber’s approach.
Approximate Price Tag:
- HEROES Act (House): $3 trillion
- HEALS Act (Senate): $1 trillion
Aid to state and local governments
- HEROES Act (House): $915 billion in direct aid. Funding will be dispersed in 2020 and 2021. Eligibility criteria expanded compared to the CARES Act and lost or foregone revenue is an eligible use of funds.
- HEALS Act (Senate): No new aid provided for state and local governments.
Use of Coronavirus Relief Fund (CRF) Assistance for Lost/Foregone Revenue:
- HEROES Act (House): Use expanded to cover lost, delayed, or decreased revenue stemming from the COVID-19 pandemic
- HEALS Act (Senate): Loosens restrictions on CFR funds. Key points include: 1) Period over which funds can be used to cover pandemic relief expenditures is extended, 2) Revenue shortfalls are an eligible use but a government can only use 25% of relief funds received for this purpose, and 3) CRF Funds cannot be used for pensions, OPEB or replenishing rainy day funds.
Unemployment:
- HEROES Act (House): Extends current federal supplement of $600 extra per week through January 2021.
- HEALS Act (Senate): Reinstates federal supplement to unemployment insurance payments, drops from the current $600 to $200 per week. The supplement would continue through September 2020 after which states would be expected to establish a formula to replace up to 70 percent of an individual’s lost wages.
Direct Stimulus Payments:
- HEROES Act (House): Provides another round of direct payments - $1,200/individual or $2,400/married filing jointly - to American families, increases the amount of money per child to $1,200 for up to three children per family.
- HEALS Act (Senate): Provides another round of direct payments - $1,200/individual or $2,400/married filing jointly - to American families, additional payments for qualified dependents to include adult dependents.
Education:
- HEROES Act (House): HEROES Act (House): In addition to other program funding, $90B appropriated for Education Stabilization Fund created under the CARES Act.
- HEALS Act (Senate): In addition to other program funding, $70B allocated for K-12 spending, but $30B is reserved only for schools that physically reopen.
Liability Protection:
- HEROES Act (House): Does not address
- HEALS Act (Senate): Liability shield established for businesses, schools, hospitals facing claims over episodes related to coronavirus.
Both proposals are essentially the starting points for negotiation but your outreach is still needed, in particular to urge your Senators to meet the House proposal providing for additional funding to help state and local governments address revenue shortfalls as a result of the pandemic, and to support legislation like the restoration of Advance Refundings to help jumpstart the economy.
* Revised on July 31, 2020.
Additional Fiscal Stimulus is Needed for the Nation’s Economic Recovery:
- As many states and thousands of local governments begin their new budget years, too many are experiencing historic budget shortfalls as they continue to respond to the pandemic. Unlike the federal government, state and local governments must begin their fiscal years on time and with a balanced budget.
- Even though previous federal bills in response to COVID-19 provided needed support through grant programs many communities rely on, they did not allow for the replacement of billions of lost revenue due to the pandemic.
- Without additional federal aid, the economic recovery will be significantly hindered as well as essential state and local services like education, health care, emergency operations, public safety and more.
- Bipartisan legislation like S. 3752 – the State Municipal Assistance for Response and Transition Act (Sens. Bill Cassidy (R-La.), Robert Menendez (D-N.J.) – is the type of assistance state and local governments need from their federal partners. The SMART Act delivers critical additional funding and it provides more flexibility in the use of funds enacted in previous stimulus packages, click here for information about the legislation and for bill text.
- Urge your Senators to support state and local governments and enact urgently needed fiscal aid.
Click here for GFOA’s Coronavirus Response Resource Center
Support Legislation to Restore Advanced Refunding of Municipal Bonds:
- The Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act is bipartisan legislation recently introduced to fully restore tax-exempt advance refundings. Led by Sens. Roger Wicker (R-Miss.) and Debbie Stabenow (D-Mich.), they were joined introduction by Sens. Shelley Moore Capito, R-W.Va., Michael Bennet, D-Colo., John Barrasso, R-Wyo., Bob Menendez, D-N.J., Jerry Moran, R-Kan., and Tom Carper, D-Del.
- The 2017 Tax Cuts and Jobs Act (TCJA) repealed this critical cost-savings tool for state and local governments and has limited the options to refinance debt, which could free up capital and be put to immediate public works purposes.
- Having the option to refinance debt is a valuable financial management tool especially since interest rates will certainly fluctuate over the lifetime of outstanding governmental bonds (which in many cases is 30 years). Without advance refunding bonds, state and local governments will pay more in interest, a cost that must be paid by state and local taxpayers.
- Urge your Senators to cosponsor S. 4129. Click here for the bill text and here for a one-page outline.
Click here for GFOA’s Resources on Advance Refundings. Click the download button below for a template letter to send to your Senator.
GFOA will continue to monitor these issues. Please contact GFOA’s Federal Liaison Center to share any letters or other outreach you conduct, and let us know if there is any way we can help to follow up with your Senators here in Washington, DC.
- Publication date: July 2020