CARES money set aside
With cities and counties not knowing how the coronavirus has affected their April sales tax collections until later this month, and their May payment until next month, lost revenue remains a mystery.
That unknown complicated the Arkansas Municipal League and Association of Arkansas’ Counties request last week for city and county funding from the state’s $1.25 billion allocation from the Coronavirus Aid, Relief and Economic Security Act.
U.S. Department of Treasury rules allow CARES Act funds to be spent on coronavirus-related expenses local governments incur from March 1 to Dec. 30, but using
the money to fill revenue gaps is prohibited. Only costs local governments didn’t account for in their 2020 budgets qualify for funding.
The AML and AAC are hopeful new spending rules or subsequent legislation will address the prohibition on revenue replacement. In the meantime, they have secured a $150 million set aside for cities and counties from the state’s CARES Act funding.
The state’s CARES Act Steering Committee endorsed the set aside last week on the condition it be spent in the fourth quarter and reviewed in September, when the lobbying organizations for cities and counties can present a more detailed proposal. Any money not encumbered by the proposal would be returned to the state.
The advancement of last week’s proposals leaves $266 million in uncommitted funds from the state’s $1.25 billion allocation. Committed funds included a $250 million reserve. States will have to return any CARES Act money not spent by Dec. 30 to the federal government.
March collections of the city of Hot Springs and Garland County’s sales taxes were better than expected. The city’s trailed the previous March by 1.09% and the county’s were up 0.53%, but AML Executive Director Mark Hayes said other localities have been harder hit.
“Eureka Springs has already lost 18% of their revenue, and as a result they have three police officer positions open, they’ve got an EMS position open and they only have one police officer patrolling the entire city during the day,” he told the committee.
The full extent of local governments’ lost revenue is unknown, he said.
“We are a little bit lost right now, unfortunately, because we don’t get good data on sales tax monies for 60 days,” Hayes said. “It becomes very difficult for us to prognosticate just how far down the line we may be for revenue, recognizing too that the law is pretty clear right now we can’t get revenue replacement.
“There’s a substantial effort in D.C. right now to change that or at least to amend the law in a way that would be more helpful in that regard.”
Hayes and AAC Executive Director Chris Villines told the committee coronavirus-related expenses not covered by Federal
Emergency Management Agency reimbursements qualify for CARES Act funding. FEMA reimburses 75% of costs related to emergency protective measures, such as the procurement of personal protective equipment.
The AML and AAC’s proposal said FEMA won’t reimburse payroll expenses related to the Families First Coronavirus Relief Act, which requires employers to provide emergency paid sick leave and expands the Family Medical Leave Act to include leave for COVID-19 related issues.
But the costs could be reimbursed by the CARES Act, the proposal said.
“Expenses incurred for this paid leave are necessarily incurred and unbudgeted expenses paid out by local governments due to this public health crisis, thus, we believe it is appropriate for reimbursement,” the proposal said.
Personnel line items affected by lost revenue could also qualify for CARES Act funding, the proposal said, allowing localities to keep police, firefighters and other positions on the payroll.
“With decreases in revenues and the inability to fund budgets, local governments cannot fund these line items, allotments, or allocations,” the proposal said. “Doing so would require local governments to borrow money or deficit spend, two actions largely forbidden by the Arkansas Constitution.”