Newest COVID relief package provides some aid; short on true relief for states

The relief bill passed last night falls short of assisting states that face strains on their budgets and increasing demand for assistance from their constituents. However, the bill does provide $900 billion for the first broad COVID-19 relief package to pass since the CARES Act was signed into law on March 27th. The major items in this legislation are the extension of unemployment insurance benefits, direct payments to individuals, and a new round of loans through a modified Paycheck Protection Program. No broad funding for state and local funding is included, but there are several provisions that will support specific activities.

Small Business Assistance

The legislation provides $284 billion for a new round of forgivable PPP loans (including the $137.5 billion remaining in the program). Even companies that have already received one loan can be eligible. Business size is limited to 300 employees, and the business must have experienced at least a 25 percent reduction in revenues between the same quarters in 2020 and 2019. Several new types of businesses are now eligible, including 501(c)(6) nonprofits.

There are several changes to the forgiveness process. Loans up to $150,000 can now be forgiven through a one-page self-certification. Businesses that also received an Economic Injury Disaster Loan (EIDL) advance are no longer required to subtract that amount from their forgiveness calculation.

One of the bill’s tax changes will also affect PPP borrowers: businesses are now allowed to deduct expenses associated with their forgiven loans. The Internal Revenue Service had recently stated that this would not be allowed under the original rules, prompting this clarification.

While the PPP changes account for the largest financial portion of the bill’s small business support, there are many other relevant provisions:

• An additional $20 billion appropriation for EIDL;
• Extension of payment deferrals for SBA 7(a), 504 and micro loans; and,
• Continuation of the payroll tax subsidy for paid sick leave.

Higher Education Assistance

The bill provides nearly $23 billion from the Education Stabilization Fund for higher education. Funds are again being divided among institutions according to a formula that is largely based on enrollment among Pell Grant recipients at the beginning of the pandemic.

Additional policy provisions provide further relief to some institutions:

• Nearly $1.3 billion in federal loans to historically Black colleges and universities is being forgiven;
• Incarcerated students are again eligible for Pell Grants (after a 26-year ban); and,
• Simplification of the federal application for student financial aid.

Individual Assistance

As is being reported widely, the legislation includes many benefits for individuals. The highest-profile item is the return of direct payments, this time at $600 per person. Additional unemployment insurance benefits are also returning, this time at $300 per week. Congress has also included an extension of the federal moratorium on evictions through the end of January.

The majority of the bill’s $7 billion for broadband access is also structured as a benefit to individuals. Low-income households may be eligible for up to $50 per month (or $75 for households on Tribal lands) toward internet access costs, and this benefit can continue for six months after the official end of the pandemic. Further, internet service providers that provide “connected devices” to these households may receive up to $100 from the federal government to offset their costs.

State and Local Government Assistance

The legislation does not include additional funding for the CARES Act’s Coronavirus Relief Funds (CRF) that provided broad assistance to state and local governments. However, the original CRF deadline on costs accrued has been extended to the end of 2021 (something that Sen. Jerry Moran has advocated on the Senate floor).

While state and local governments are not receiving immediate assistance with their overall budget crises, the bill does include some targeted support. The bill provides more than $4 billion to be transferred to state and local governments for vaccine distribution and another $22 billion for other pandemic-related health service costs. Funding is also available for primary and secondary education costs. Still, these contributions are much less than the $160 billion in state and local aid that was being discussed as recently as one week ago.