With CARES Act deadline approaching, some state leaders eye extension, reallocations

With CARES Act deadline approaching, some state leaders eye extension, reallocations

By MARY SELL and TODD STACY, Alabama Daily News

MONTGOMERY, Ala. – With a year-end deadline to spend it, changes in how the state is using more than $1.7 billion in federal CARES Act money could be coming, state officials said recently. 

Money that isn’t spent by Dec. 30 has to be returned to Washington.

“There is a chance that some of it may have to go back, while we’re working hard to not have to do that,” Alabama Finance Director Kelly Butler told Alabama Daily News this week. “But it’s a lot of money and some of these programs probably won’t be able to use all their money. So we’re gonna work hard not to do that, but it’s definitely a possibility.”

The CARES Act was approved by Congress in March. In late May, state lawmakers and Gov. Ivey eventually agreed on a distribution plan to various state agencies, organizations and in some cases, individuals. Around the Capitol, those have been called “buckets.”

According to a dashboard updated daily by Finance, as of early this week, $790.3 million of the state’s $1.76 billion had been spent. Leaving $974.2 million “unexpended.” But because many programs and entities are being reimbursed for COVID-related expenses, more money is going out everyday, Butler said.

The state’s total does not include $115 million that went directly to Jefferson County, the state’s only county with a population of more than 500,000.

Congress put tight restrictions on how the funds could be used, including not allowing any expenses other than those directly related to the outbreak and not allowing any spending past Dec. 30. The expenses also have to have originated after March 27, not prior to the virus.

That deadline was set in the CARES Act when many believed the virus would be gone by the end of 2020.

“Right now, I think the time deadline is the biggest challenge (to spending the money)” Butler said. 

“Since May, there have been many things that have come across our desk that really look like great things and we would have liked to have done that just don’t get past the allowable use test,” Butler said.

If states spend their Coronavirus Relief Fund money in ways determined later by the federal government to be unallowable uses, they could have to pay it back. 

Butler said in terms of that risk, Alabama has been more conservative in its spending than other states. 

“If we’re to be criticized, that may be where it comes, but we just don’t believe it’s worth the risk to stretch that to the limits,” he said. 

Ivey spokeswoman Gina Maiola said that as the deadline nears, the governor and Finance are urging everyone who has been allocated funds to submit their reimbursements or applications. 

“Gov. Ivey remains focused on getting this money in the hands of those who need it,” Maiola said. “In consultation with Legislative leadership, the governor will evaluate the need to shift funds again to potentially address areas that will impact our economy, specifically small businesses. As Gov. Ivey has pointed out, $1.7 billion is a hefty chunk of money to spend in six months, but she and the team at Finance will continue working to get this spent and into the hands of Alabamians.”

Hoping for an extension, more flexibility

Butler said he thinks a time extension is a possibility, but not one the state can count on.

Rep. Steve Clouse, R-Ozark, said the situation is fluid and depends on action in Washington.

“Obviously now they’re not going to have another stimulus package before the election,” Clouse, House General Fund budget committee chairman, said. “We’re hoping that they may come back with a second stimulus and give us some more leeway with what to do with this money. But who knows, they still might in a lame duck session.”

Congressman Bradley Byrne, R-Mobile, supports adding that flexibility to the CARES Act.

“While the CARES Act provided invaluable aid to help weather the crisis, provisions in the bill that have prevented states from spending all their emergency funds require an immediate legislative solution,” Byrne said. “With the year-end deadline to spend these funds approaching, Congress should prioritize passing bipartisan legislation to give states the flexibility they need to responsibly spend all the CARES Act assistance allocated to them.”

Senate President Pro Tem Del Marsh, R-Anniston, said he’s talked to Sen. Richard Shelby’s office, requesting more flexibility in spending and a deadline extension.

“It could happen, but I think what we better plan is to try to use the dollars in the time frame that’s been given,” Marsh said.

A previous Senate proposal, supported Shelby, for another stimulus package included extending the spending deadline on the funds. At this time, Phase IV COVID-relief negotiations continue, Shelby’s office said on Wednesday. He chairs the Senate Appropriations Committee. 

U.S. Rep. Robert Aderholt, who serves on the House Appropriations Committee, told Alabama Daily News he continues to support President Donald Trump’s efforts to negotiate another COVID-19 relief package.

“The HEALS package proposed by the Senate would directly address this issue and allow a longer time line for the spending of CARES Act funding,” Aderholt said.

Many of the “buckets” are mitigating the effects of COVID on Alabamians and could continue to do so if given more time. The broadband voucher program for K-12 students who need internet access at home is an example, Butler said. It has been allocated more than $100 million, but as of this week, only about $500,000 had been spent. 

More for unemployment

That distribution plan approved in May allows Ivey to change the flow of funds with the unanimous approval of six top lawmakers: the Speaker of the House, the Senate President Pro Tem and the four budget chairmen. The full Legislature does not need to approve the changes.

In September, Ivey and those six lawmakers created a new “bucket,” dedicating $300 million to unemployment benefit costs in an effort to avoid a significant increase in the tax paid by employers.

But even with that infusion, businesses are expected to be taxed more to replenish the fund. The state’s unemployment insurance benefits trust fund, is supported by a tax on employers. Tara Hutchison, a spokeswoman for Alabama’s Department of Labor, said since the pandemic began the state has spent about $600 million on unemployment benefits, almost all of that to people with COVID-19 related job losses.

Several lawmakers this week told ADN they expect another transfer of funds, especially if the spending deadline is not delayed. A few mentioned more money for unemployment.

“I think we can allocate another $300 million to the Unemployment Compensation Trust Fund to shore it up to back to where it was before the pandemic so we can try to prevent those unemployment compensation rates from going up on businesses,” Clouse said.

More for Broadband, Business

Marsh said he’d like to see unspent money dedicated to unemployment and broadband expansion, though there’s still some disagreement about what qualifies a COVID-related broadband expense.

“Those are the two things I think we should at least talk about if, in fact, there are monies left,” Marsh said. “I don’t think anybody wants to send those dollars back to the federal government if we can utilize them.”

Marsh said he assumes there will be some reallocations done in December.

At least one of the six lawmakers needed to sign off on a redistribution questions whether money has gone where it’s most needed, including to businesses impacted by the pandemic.  

“I don’t think we’ve been successful in getting the monies to the primary people that have been damaged,” Sen. Greg Albritton, R-Range, said. “By that, I mean the small business owners, the people that can’t open their shops or can’t open their shops to a large extent. Every restaurant is restricted to a 50% capacity. You can’t hardly make a living with that.”

Under the spending plan agreed to in May, the state allocated $300,000 to small businesses, non-profits and faith-based organizations. Ivey in July announced that $100 million of the state’s CARES money would fund “Revive Alabama” grants for small businesses. The grants, which can total up to $15,000, are meant for companies that did not receive funding from the federal Paycheck Protection Program.

According to state records, more than $96.5 million has been expended to small businesses, while $21.3 million went to nonprofits and $17.9 million went to faith based organizations. That leaves approximately $164.8 million available under the current spending framework without revisiting the law.

Asked if there were any plans to add any more money for another round of businesses grants, Maiola said Ivey is “extremely interested in exploring what our options are to bring additional help to small businesses.” 

Maiola said the administration is being careful to follow both the federal and state parameters but that businesses were a priority when looking at shifting funds.

“…the governor will evaluate the need to shift funds again to potentially address areas that will impact our economy, specifically small businesses,” she said.

Albritton, chairman of the Senate General Fund budget committee, said there’s recognition that a reallocation will likely be needed, “but the difficulty is how there’s going to be done”

“…Last time it was pretty open and shut. … I just can’t imagine that all this money will be that easily dispersed,” he said.

See below the chart from the state showing all Coronavirus Relief Fund spending so far. For the more detailed, interactive chart, visit this link.