The HEALS Act And Its Impact to State and Local Governments

Published: July 28, 2020

SLED Market AnalysisCoronavirus (COVID-19) PandemicPolicy and Legislation

Senate Republicans on Monday released their stimulus package proposal: the Help, Economic Assistance, Liability Protection and Schools (HEALS) Act. It would provide another round of direct stimulus payments to Americans, extend unemployment benefits, freeze Medicare premiums, offer more Paycheck Protection Program (PPP) funding and extend liability shields for businesses facing COVID-19-related lawsuits.

With Congress getting ready to adjourn for a month-long recess on Aug. 7, there’s a sense of urgency to pass the bill before the break. Phase 4 relief is the anticipated follow-up legislation to the $2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act that was enacted on March 27th.

While the full text of the bill has yet to be released, here is what is being floated around the hill and its direct impact on State, Local, and Education (SLED) governments.

More Flexibility for States Using the Coronavirus Relief Fund (CRF) & State Income Tax Changes:

Including new funds for state and local governments is a big priority for Democrats. They included $1 trillion in new funding in the $3 trillion HEROES Act, which the House passed in May (the Senate rejected the HEROES Act in lieu of creating their own bill).

For states and localities, the bill would expand the allowable use of the Coronavirus Relief Fund (CRF) established in the CARES Act by permitting funds for use beyond December 31, 2020 to 90 days after the end of a state or localities’ fiscal year 2021 date. The bill would also allow states and localities to use CRF funding to cover revenue shortfalls incurred in fiscal year 2020 and 2021, subject to a limit of 25 percent of relief funds. States and localities would be prohibited from using CRF funds to replenish rainy day funds or pension benefits. The HEALS Act would also modify state income taxes by mandating that “through 2024, employees who perform employment duties in multiple states would be subject to income tax only in their state of residence and any states in which they are present and performing employment duties for more than a limited time during the calendar year.”

Emergency Appropriations

The HEALS Act includes $306 billion in emergency appropriations for coronavirus health response. Looking at ones that directly impact the SLED market are the following:

FEMA Grants – $930 million. The proposal provides $930 million for emergency grant programs, including $365,000,000 for Assistance to Firefighter Grants, $365,000,000 for Staffing for Adequate Fire and Emergency Response Grants, and $200,000,000 for the Emergency Food and Shelter Program.

WIOA State Grants – $450 million. The proposal provides $450 million for adult, youth, and dislocated state grants for states and communities to respond to the workforce impacts and layoffs resulting from the coronavirus.

State Unemployment Insurance and Employment Service Operations – $1.15billion. The proposal provides $1.15 billion for states to process unemployment claims and make needed IT upgrades to their unemployment systems.

Centers for Disease Control and Prevention – $3.4 billion. The proposal provides $3.4 billion to CDC, including $1.5 billion to continue supporting state, local, and territorial public health needs; $500 million to enhance seasonal influenza vaccination efforts; $200 million to enhance global public health security efforts; and $200 million to modernize public health data reporting.

Substance Abuse and Mental Health Services Administration – $4.5 billion. The proposal provides $4.5 billion including:

  • Mental Health Services Block Grant - $2 billion, of which, no less than 50 percent of funds shall be directed to behavioral health providers
  • Substance Abuse and Prevention Treatment Block Grant - $1.5 billion
  • Certified Community Behavioral Health Clinics - $600 million
  • Suicide Prevent Programs - $50 million
  • Project AWARE - $100 million to support mental health once children return to school
  • Emergency Grants to States - $250 million for flexible emergency grants to state

Administration for Children and Families – $16.7 billion. The proposal provides $16.7 billion, including:

  • Low Income Home Energy Assistance Program - $1.5 billion to help low income households pay home heating and cooling bills
  • Child Care and Development Block Grant - $5 billion for child care, including direct support for child care providers to help ensure working parents have access to child care so they can work or return to work
  • Back to Work Child Care Grants - $10 billion
  • Children and Families Services Programs - $190 million for family violence prevention and child welfare programs, to support services for particularly vulnerable families and populations.

Public Health and Social Services Emergency Fund – $78.1 billion. The proposal provides $87.1 billion, including:

  • Provider Relief Fund - $25 billion
  • Testing - $16 billion for testing, contact tracing, and surveillance in states. This new funding, when combined with approximately $9 billion that remains unallocated from the Paycheck Protection Program and Health Care Enhancement Act, would make $25 billion available for these purposes.
  • BARDA - $20 billion for vaccine, therapeutic, and diagnostic development
  • Vaccine Distribution - $6 billion to develop and execute a new COVID-19 vaccination distribution campaign coordinated through CDC
  • Strategic National Stockpile - $2 billion
  • Community Health Centers - $7.6 billion
  • Children’s Hospital Graduate Medical Education - $250 million
  • Rural Health Clinics - $225 million
  • Poison Control Centers - $5 million
  • Direct Workers Training - $5 million

Education Stabilization Fund – $105 billion. The proposal provides $105 billion to help get students back to school and provide for the continued learning of all students in elementary and secondary education and higher education, as follows:

  • $1 billion for the Bureau of Indian Education and outlying areas;
  • $5 billion for the Governors Emergency Education Relief Fund;
  • $70 billion for the Elementary and Secondary School Emergency Relief Fund; and
  • $29 billion for the Higher Education Emergency Relief Fund

Airport Improvement Program (AIP) – $10 billion. The proposal provides $10 billion to FAA’s AIP to maintain operations at our nation’s airports that are facing a record drop in passengers. Funding will be distributed by statutory entitlement and enplanements formulas and may be used for operating expenses and debt service. Funding is also set aside to maintain Contract Tower operations.

In conclusion, while the Senate did address funding for state and municipal governments in the HEALS Act, they did not provide new funding besides some of the emergency appropriations listed above.  Instead, they simply made it easier for states and municipalities to spend up to $150 billion in funds that were already allotted under the CARES Act.