L.A. Business This Week 5/22/20
The House Approves the HEROES Act
Last Friday, the House passed the HEROES Act. It is a $3 trillion coronavirus response package that aims to deliver address a number of issues that legislators believe to be critical to the federal response. Those most highlighted are funding to state and local jurisdictions, the Heroes’ Fund, an additional round of stimulus checks, modifications to the Payroll Protection Program (PPP), extending unemployment benefits, and addressing food security.
Funding for State and Local Governments
State and local governments are expected to see massive budget deficits because the curtailed economic activity in the past few months as most states and localities enacted shelter-in-place or safer-at-home measures. California alone projects a $54 billion deficit over the next three years. The HEROES Act would allocated $875 billion combined to state and local governments, and breaks down as follows:
- $500 billion to States
- $102 billion divided equally between each state, and Washington D.C.
- $49 billion award to state’s based on percentage of total US COVID-19 cases
- $150 billion based on state’s percentage of US population
- $199 billion based on state’s share of national unemployment
- $375 billion to local governments
- $187.5 billion to municipalities based on formula funding
- $187.5 billion to counties based on population size
Many states, including California, will also experience impacts of the education funding. The HEROES Act includes a total of $100.15 billion to support the educational needs of the States. Of the $100.15 billion, $90 billion is to support state and local funding for elementary, secondary and post-secondary educational institutions.
The bill establishes this $200 billion fund to ensure essential workers that “work during the pandemic receive hazard pay.”
Payroll Protection Program
Several amendments are made to the PPP, including:
- Extending coverage period to December 31
- Technical clarifications for hospitals in bankruptcy
- Modifies PPP funds to carve out:
- 25% of existing funds for small businesses with 10 or fewer employees
- 25% of existing funds for solely for nonprofits, regardless of size
As an omnibus bill, the HEROES Act seeks to offer relief to businesses and citizens during this crisis. The bill anticipates that there will be a need to increase the social safety net, by expanding Supplemental Nutrition Assistance Program (SNAP) benefits. Other policies of note are student debt forgiveness of up to $10,000, rental and mortgage assistance programs, funding to help homeless individuals and to prevent low-income, at risk renters for falling into homelessness.
While the House passed the bill, it is not expected to gain traction in the Senate. The President announced that the bill would be “dead on arrival” if it made it to his desk.