Request approved to shift U.S. funds for state contingency

Congress’ ongoing negotiations on a coronavirus relief package have Arkansas officials making contingency plans to ensure the state uses unspent federal relief funds, just in case no agreement is reached to extend a spending deadline.

The Arkansas Legislative Council on Friday approved an agency’s request to give it spending authority of up to $300 million so it could transfer unspent relief funds to the state unemployment insurance trust fund if Congress doesn’t extend the current Dec. 30 deadline to use the aid.

But the amount that would be transferred is about a third of that.

State Budget Director Jake Bleed told lawmakers he anticipates that the Department of Finance and Administration would be able to transfer roughly $100 million into the trust fund as reimbursement for pandemic-related costs.

The council will meet again Dec. 29 to consider any new requests by agencies for increased authority to spend relief funds if the deadline isn’t extended, said a council co-chairman, Rep. Jeff Wardlaw, R-Hermitage.

The state originally received $1.25 billion under the federal Coronavirus Aid, Relief, and Economic Security Act passed by Congress and signed into law by President Donald Trump in March. The money was to be spent by the end of the year on needs related to the pandemic.

After Friday’s council meeting, Gov. Asa Hutchinson said that “if Congress extends the December 30 deadline for spending CARES Act funds then we will reconsider the most urgent needs

based upon the new flexibility that Congress will have provided.

“As to how we address the unemployment insurance fund issue, all options will be on the table from legislative action to additional transfers to increase the balance in the fund,” the Republican governor said Friday afternoon in a written statement. “I won’t know exactly the best option until we see the details of Congressional action and what additional funds might be utilized by the state.”

At the recommendation of the steering committee he appointed to review CARES Act funding requests, the state previously transferred $165 million of the funds to the unemployment insurance trust fund to shore it up and avoid a projected $10 million increase in rates to employers next year.

That trust fund now totals $800.7 million, Department of Commerce spokeswoman Alicia Curtis said Friday after the council’s meeting.

Last month, the steering committee recommended transferring $50 million more to the trust fund to mitigate unemployment insurance rate increases next year stemming from more than $200 million in claims against employers in the second quarter of this year.

Last week, the CARES committee recommended transferring unspent relief funds to the trust fund if the spending deadline stays the same.

The state has about $41.9 million in the relief funds that have not been allocated and are available for distribution, Bleed said.

The state also has about $205 million in the funds that have been allocated to state agencies but haven’t been spent yet, he said.

Bleed said state officials anticipated that Congress would extend the deadline. No change was made as of Friday night.

“In the event that they don’t act, we want to make sure that we don’t forfeit any funding and that we use the remaining CARES Act funding in a way that best helps the state going forward,” he said.

Bleed said the finance department’s request for up to $300 million in spending authority would allow the department, “in the event that Congress does not act, to sweep any remaining money over to the unemployment insurance trust fund.”

“We still plan on pursuing that,” he said. “However, in the last couple days, we have been made aware of some information and numbers in our fight against covid that make us think that the amount we would be transferring over to unemployment insurance will actually be significantly less.”

He said state officials learned there are some limitations regarding how much the state can transfer to unemployment insurance.

“That is new information that has never been presented to us,” said Sen. Missy Irvin, R-Mountain View.

“That was new information to me as well,” Bleed said.

The state had put a “fair amount” of money into the trust fund and ” … I think I had that in my head and I think a lot of us did that all of that funding was somehow … related to covid-19,” he said.

But Bleed said some of the funding isn’t considered to be necessarily related to covid-19.

“And regardless, we already moved $165 million over there, so the total amount that the trust fund has paid out” is about $330 million this year, he said.

“What we are looking at is about $100 million more would fully reimburse the trust fund for everything that they paid out,” Bleed said. “After that, any additional funding would not be an allowable use of CARES Act money as I understand it.”

Irvin said she has favored putting more money into the unemployment fund to prevent small businesses such as boutiques, gyms, and restaurants that were closed earlier in the pandemic from having to pay increased unemployment insurance rates based on increased claims in the second quarter of this year.

Bleed noted that state numbers for positive covid-19 cases, hospitalizations and deaths continue to grow.

“We are aware that between now and the 30th, we may get requests when they identify a need, which CARES Act money can be used to support,” he said.

“If we, for example, expand the capacity in hospitals, we have the funding in place and obviously I think have the need and desire to respond, but that would require additional action by this body, an emergency request for an appropriation to spend that money for that purpose,” Bleed said.

He said state officials have identified additional costs incurred by some agencies for which the state could be reimbursed with CARES money under some recent guidance from the U.S. Treasury Department.

“If we did that, that would put us in a better position for next year,” Bleed said.

Sen. Joyce Elliott, D-Little Rock, said she has repeatedly heard that public school employees don’t have the required equipment to be safe.

“Is there any way you can assure me that there is money someplace else that could help these folks [with] equipment they need to be safe that … is not in the [federal relief funds] that you are talking about sweeping up? Should I be content that that will be addressed someplace?” she said.

Bleed said the Department of Education has been assessing that.

He noted the CARES Act steering committee last week declined to take up a proposal by Sen. Will Bond, D-Little Rock, to provide $500 health and safety payments to public school teachers and other staff members. Bond has estimated his proposal would cost $34.5 million.

“I can’t say that that will continue to be their decision,” Bleed said.

Elliott, who is a retired teacher, said, “No matter what the Education Department is saying, that’s not what the folks on the ground, who are doing the work, are saying.”

Rep. Jack Ladyman, R-Jonesboro, said, “It is not just that we can give it to the schools.

“We have to figure out how we can adequately protect these small businesses” from unemployment insurance rate increases, he said.

“Make sure that we give them their adequate funding,” Ladyman said.

Rep. Mary Bentley, R-Perryville; said small businesses haven’t received millions in federal funds like the state Department of Health and “the schools have had money, federally there has been a lot of money that has been spent.

“If we go under because we can’t pay the unemployment costs,” it’s going to hurt the state, she said.