Negotiations on Fifth Coronavirus Relief Package at a Stalemate
July 30, 2020
On July 27, GOP Senate leaders unveiled the text of their long-awaited COVID-19-relief legislation. The $1 trillion proposal – which was negotiated with the White House and packaged as a series of bills – represents a counteroffer to the $3 trillion House-passed HEROES Act (HR 6800). While the Senate GOP proposal, known as the HEALS Act, has allowed bipartisan talks to begin in earnest, the two parties remain far apart.
One of the biggest hurdles that negotiators will need to address is additional fiscal relief for state and local governments. While the HEROES Act included $915 billion in direct federal aid for states and localities – with $187.5 billion dedicated to counties – the Senate legislation does not include any such funding. This issue has emerged as a key priority for Democrats, as well as a number of Republicans.
For its part, CSAC has continued to aggressively advocate for robust, direct and flexible federal fiscal support to counties of all sizes. In recent correspondence to California lawmakers, CSAC warned that failure to provide additional federal financial assistance will have dire consequences, including public employee furloughs and layoffs, as well as cuts to important programs and services. CSAC also is urging lawmakers to provide resources for other critically important programs, including Medicaid/Medi-Cal and the Title IV-E foster care program. Counties are encouraged to contact their Member of Congress today to urge them to include direct financial support to counties in the next COVID-19 relief package.
Another major sticking point in the negotiations is how to address the expiration of temporary Unemployment Insurance (UI) payments. The benefit, which was established by the CARES Act, provided those receiving UI with an enhanced federal payment of $600 per week through the end of July. While the HEROES Act would extend this benefit through January of next year, the Senate Republican plan would reduce the payment to $200 week for the next two months before transitioning to a system where benefits would equal 70 percent of previous wages.
The final roadblock in negotiations is whether to provide liability protections to business, schools, and other organizations that reopen. For his part, Senate Majority Leader Mitch McConnell (R-KY) has insisted that the legislation include a robust liability shield. At the same time, Democrats have signaled that there will be no deal on a broader package unless the immunity provision is dropped or significantly altered. From their perspective, Congress must first agree to adopt enforceable standards for protecting employees, customers, and the general public before seeking liability protections for businesses. The disagreement over this provision could ultimately stall negotiations or force lawmakers to move a smaller relief measure.
To follow are select details of the Senate HEALS Act:
Added Flexibility for Coronavirus Relief Fund (CRF) – The bill would expand the end date for allowable CRF-related expenditures from December 30, 2020 to 90 days after the last day of a government’s fiscal year 2021. Furthermore, the legislation would allow recipients of CRF dollars to cover revenue shortfalls, subject to the following limitations:
- Direct CRF recipients could only use funds to cover lost revenues if they have distributed at least 25 percent of their allocation to “downstream” governments (i.e., cities within a county).
- CRF recipients may only use 25 percent of their total CRF allocation towards lost revenue.
Unemployment Insurance – The legislation would cut the enhanced federal unemployment insurance benefit from $600 per week down to $200 per week through September. Beginning in October, the benefit would be set at 70 percent of a worker’s previous wages.
Direct Payments to Individuals – The proposal would provide direct stimulus payments of $1,200 and $2,400 to individuals and couples, respectively. Consistent with the CARES Act, the direct payments would be provided to individuals with an adjusted gross income up to $75,000, with the amount of the rebate phasing out completely once the income of single filers exceeds $99,000, the income of head of household filers with one child exceeds $146,500, or the income of joint filers with no children exceeds $198,000.
Small Business Assistance – The legislation would allow small businesses that have sustained a more than 50 percent drop in revenue to apply for a second Paycheck Protection Program (PPP) loan.
Funds for School Reopening – The bill would provide $105 billion to help schools reopen in the fall.
COVID-19 Testing and Vaccine Development – The measure includes $16 billion in grants to states for COVID-19 testing capacity, contact tracing and surveillance, as well as $20 billion for vaccine, therapeutic and diagnostic development.
Funds for Local Grant Programs
The HEALS Act would provide funding for a number of local grant programs, including:
- $930 million in FEMA Grants, including $365 million for the Assistance to Firefighter Grants program, $365 million for staffing for Adequate Fire and Emergency Response Grants, and $200 million for the Emergency Food and Shelter Program.
- $3.4 billion in CDC funding, including $1.5 billion to continue supporting state, local, and territorial public health needs.
- $4.5 billion for the Substance Abuse and Mental Health Services Administration, including $2 billion for the Mental Health Services Block Grant; $1.5 billion for the Substance Abuse and Prevention Treatment Block Grant; and, $600 million for Certified Community Behavioral Health Clinics.
- $7.6 billion for Community Health Centers and $225 million for Rural Health Clinics.
- $500 million for Dislocated Worker Grants and $450 million for the Workforce Investment Opportunity Act.
- $1.5 billion for the Low Income Home Energy Assistance Program; $5 billion for the Child Care and Development Block Grant; and, $190 million for family violence prevention and child welfare programs.
- $2.2 billion for Tenant-Based Rental Assistance and $1 billion for the Public Housing Operating Fund
Enhanced Tax Credits – The bill would increase the percentage of qualified wages reimbursed through the enhanced employee hiring and retention payroll tax credit (ERTC) to 65 percent (up from 50 percent as stipulated in the CARES Act). The legislation also would lower the threshold to qualify for the ERTC, giving more small businesses the ability to claim it.
In addition, the HEALS Act would expand the work opportunity tax credit (WOTC) to include 2020 qualified COVID-19 unemployment recipients. This would allow employers to claim a credit of up to $5,000 for hiring an individual who was previously unemployed.
Finally, the bill would allow employers to claim a payroll tax credit for COVID-19 testing, personal protective equipment, cleaning supplies, and other expenses to prevent the spread of the coronavirus. The credit would be available to self-employed individuals – including sole proprietors, independent contractors, and farmers – and would apply to expenses incurred between March 12, 2020 and January 1, 2021.