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The Coronavirus Relief Fund: A Guide for Texas Local Governments

The Coronavirus Relief Fund (“Fund”) provides $139 billion to states and local governments for use toward expenditures incurred due to the public health emergency with respect to COVID-19.[1] The funding is allocated by population proportions among the States, with a minimum of $1.25 billion for smaller states. Eligible local governments (see “Eligibility” below) can apply for and receive a portion of their state’s allocation in proportion to their population compared to the state’s (see “Administration” below). Texas is entitled to $11.243 billion from the Fund based on the proportional allocation formula.

Administration

The Coronavirus Relief Fund is administered by the Treasury Department. The Treasury Department must distribute the Fund to the states and eligible local governments by April 26, 2020.

The Fund will be allocated among the states as follows: (i) first, $1.25 billion will be allocated to each state regardless of population; (ii) second, the balance of the Fund ($76.5 billion) will be allocated to each state in accordance with its population’s proportionate share of the population of the 50 states (excluding the population of D.C. and U.S. Territories). The allocation formula is as follows:

State Allocation = $1.25B + [$76.5B * (State Population / 50-State Population)

If an eligible local government (see “Eligibility” and “Regulatory Updates” below) applies to receive a direct distribution from the Fund (see “Application” below), the eligible local government will receive an amount based on its population’s proportionate share of the population of its state, calculated in accordance with the following formula:

Eligible LG Allocation = (State Allocation * 0.45) * (Local Government Population / Total State Population)

Amounts distributed to eligible local governments will be deducted from the allocation to the state in which that local government is located.

The most-recent population data from the Census Bureau will be used for all allocation purposes.

Eligibility

All states (excluding D.C. and U.S. Territories) are eligible for distributions from the Coronavirus Relief Fund.

A local government is eligible to receive a direct distribution (to be deducted from its state allocation) from the Fund only if:

  • The local government is a county, municipality, town, township, village, parish, borough, or other unit of general government below the State level; and
  • The local government’s population exceeds 500,000.

In Texas, at least 12 counties (Harris, Dallas, Tarrant, Bexar, Travis, Collin, Hidalgo, El Paso, Denton, Fort Bend, Montgomery, and Williamson counties) and 6 municipalities (Houston, San Antonio, Dallas, Austin, Fort Worth, and El Paso) are eligible for direct distributions from the Fund. Where populations are served by more than one local government that is eligible for direct assistance from the Fund (e.g., the City of Dallas and Dallas County), the Treasury Department will determine how to allocate direct assistance to those local governments (see “Regulatory Updates” below).[2]

Compliance Requirements

Distributions from the Coronavirus Relief Fund must be used to cover only those costs (“Eligible Costs”) of the recipient state or local government that:

  • Are necessary expenditures incurred due to the public health emergency with respect to COVID-19;
  • Were not accounted for in the budget most recently adopted (prior to the CARES Act’s enactment on March 27, 2020) by the recipient; and
  • Are incurred between March 1, 2020, and December 30, 2020.

The CARES Act requires the Treasury Department’s Inspector General to monitor the receipt, disbursements and use of funds from the Coronavirus Relief Fund. If the Inspector General determines that a state or local government has used Fund distributions to cover ineligible costs, an amount equal to the amount used inappropriately must be booked as a debt of the recipient to the federal government.

The meaning of “necessary expenditures” is not defined in the CARES Act. It is possible that implementing regulations from the Treasury Department or guidance from the Treasury Department’s Inspector General will define the scope of “necessary expenditures” more fully (see “Regulatory Updates” below). In light of the foregoing, although reasonable and proper expenditures that would not have been incurred but for the public health emergency of COVID-19 will likely be considered “necessary expenditures” under the CARES Act, local and state officials should make expenditures of Fund distributions only in reliance upon legal counsel until agency guidance is provided.

Distributions from the Fund may be used to account for eligible COVID-19 related expenses (as described above) but may not be used to account for general revenue shortfalls, even if such shortfalls are due to the COVID-19 pandemic. For example, if $1 billion in Fund distributions are sent to a government with revenues that are $5 billion lower than expected and $500,000 in eligible COVID-19-related expenses, the government may use only $500,000 of its $1 billion total Fund distributions (to cover its eligible COVID-19 related expenses).[3]

Application

States are not required to apply (but must submit payment information to the Treasury Department; see “Regulatory Updates” below) for distributions from the Coronavirus Relief Fund. Appropriate distributions to the states will be made by the Treasury Department by April 26, 2020.

A local government seeking direct distributions from the Coronavirus Relief Fund must submit to the Treasury Department a “certification” signed by its chief executive stating that the local government’s intended use of such distribution is to cover Eligible Costs (see “Compliance Requirements” above). The Treasury Department has published guidance and materials for use by local governments to obtain direct disbursements from the Relief Fund.

Regulatory Updates

On April 13, 2020, The Treasury Department published guidance and application materials for eligible state and local governments to apply for distributions from the $150 billion Coronavirus Relief Fund. To receive distributions from the Coronavirus Relief Fund, eligible state and local governments must submit completed payment information, required supporting documentation, and, in the case of local governments, a certification relating to the proper use of funds, via this online portal on or before April 17, 2020. Governments that fail to make the required application by April 17, 2020, may not receive any payment from the Fund.

Local Government Eligibility: Under the Treasury Department guidance, local governments eligible for receipt of direct payments from the Fund include any county, municipality, town, township, village, parish, borough, or other unit of general government below the State level with a population that exceeds 500,000. The Treasury Department has provided a listing of eligible units of local government here.

Overlapping Jurisdictions: Where a local government (g., a municipality) is situated entirely within the boundaries of a larger local government (e.g., a county), the following rules apply as to calculating a local government’s population for eligibility and payment amount purposes:

  • Eligibility Threshold: The larger local government may always count the population of a smaller constituent local government as its own for the purpose of determining whether it meets the 500,000-threshold for eligibility.
    • Payment Amount: The larger local government may count the population of a constituent local government as its own for the purpose of determining its payment amount only if:
      • the smaller, constituent local government is ineligible for direct distributions from the Fund (because its population does not exceed 500,000); OR
      • The smaller, constituent local government is eligible for direct distributions from the Fund (because its population exceeds 500,000) but does not submit to Treasury Department the required application and certification for such direct distribution.

If the smaller, constituent local government submits the required application and certification for direct Fund distributions, the population of the smaller local government will be subtracted from the population of the larger local government for purposes of calculating the larger local government’s payment amount.

The Treasury Department provided the following examples to illustrate these rules:

  • Example One: County A has a total population of 550,000, comprised of 75,000 in City B (the incorporated part of the county within the borders of County A) and 475,000 in the unincorporated part of the county.
    • County A is eligible to receive a payment, because its total population (including both the incorporated City B and the unincorporated part of the county) is greater than 500,000.
    • County A’s payment amount will be calculated based on a population of 550,000.
    • City B is not eligible to receive a payment because its population is less than 500,000.
  • Example Two: County C has a total population of 900,000, comprised of 750,000 in City D (the incorporated part of the county) and 150,000 in the unincorporated part of the county.
    • Both County C and City D are eligible to provide a certification, because their total respective populations exceed 500,000.
    • If County C provides a certification but City D does not, County C’s payment amount will be based on a population of 900,000.
    • If both County C and City D provide certifications, County C’s payment amount will be calculated based on a population of 150,000 (total population less the population of City C). City D’s payment amount will be calculated based on its population of 750,000.

Population Data: The Treasury Department will use data from the U.S. Census Bureau’s Population Estimates Program for determining the populations of States and local governments, specifically the 2019 data from the 2019 Vintage. That data is available here for States and here for counties, but has not been published for sub-county local governments.

Use of Funds: The Treasury Department reiterated the use-of-funds restrictions stated in the CARES Act (see “Compliance Requirements” above) and stated that additional information on eligible uses of Fund disbursements by governments will be posted as it becomes available.

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[1] The Coronavirus Relief Fund also provides $8 billion to Tribal governments and $3 billion to the District of Columbia and US Territories.

[2] Grant A. Driessen, The Congressional Research Service, The Coronavirus Relief Fund (CARES Act, Title V): State and Local Allocations 5-6 (April 1, 2020).

[3] Id. at 2.

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