Image for Talk of More Aid on Heels of Bill to Restock PPP

The House will vote today on a $480 billion bill to restock the Paycheck Protection Program, Treasury issued guidance on emergency relief funds for states and local government and battle lines were staked for yet another round of COVID-19 federal aid.

The Senate already has approved the latest $480 billion relief legislation, which puts another $310 billion into the PPP with stricter guidelines to direct forgivable loans to small businesses. The bill also provides $75 billion to hospitals and health care clinics to cover coronavirus expenses and $25 billion to expand testing.

Treasury guidance for the $150 billion Coronavirus Relief Fund, which was contained in the earlier-enacted CARES Act, says states can use the money to provide economic support for COVID-19-related business interruptions and unemployment. States may transfer funds to local governments to cover expenses resulting from public health emergencies. Funds cannot be used to plug budget shortfalls.

The guidance lists eligible expenditures that include payroll and paid leave for public safety, public health, health care, human services and similar employees involved in mitigating or responding to the COVID-19 outbreak. Ineligible expenditures include backfilling the state share of Medicaid, damages covered by insurance and payroll for public employees not substantially dedicated to fighting the coronavirus outbreak. Other ineligible expenses include severance pay, legal settlements, workforce bonuses, reimbursement to donors and expenses covered by other federal emergency relief funding.

States and local governments have pushed for additional financial assistance, which House Speaker Nancy Pelosi has pledged to include in a fourth major emergency relief measure, while Senate Majority Leader Mitch McConnell urged tapping the brakes on more federal aid and assessing how current funding is being applied. In a tweet, President Trump indicated support for additional aid to state and local government tied to infrastructure investments and a payroll tax cut.

The battleground for the next relief legislation is also in contention. Pelosi said the measure will start in the House, not the Senate, to avoid another “take-it-or-leave-it” position, which has especially riled up the progressive wing of the House Democratic caucus. “We’ll pass it in the House,” Pelosi said. “If [the Senate wants] to pass their own bill, we’ll go to conference. If they want to make some contribution that might be an improvement and something we can all agree on, we’ll go to the table.”

Pelosi’s agenda includes financial assistance to state and local governments, including upgrades to unemployment insurance claim systems, as well as an increase in food stamp payments, rental and mortgage help for unemployed workers who have lost employer-provided health insurance and a rescue plan for the US Postal Service. She also wants funding for national vote-by-mail for the November general election and hazard pay for coronavirus frontline workers.

McConnell has rained on more relief that he characterizes as “blue state bailouts.” Talking to a conservative talk-show host this week, McConnell expressed some openness to looking at more aid for state and local government, but said, “We’re not ready to just send a blank check down to states and local governments to spend any way they choose to.”

There has been discussion about an infrastructure investment package to stimulate the economy badly damaged by government-order COVID-19 shutdowns. Trump seemed to revive that idea, as well as tax incentives, in a pair of tweets:

Donald J. Trump @realDonaldTrump I urge the Senate and House to pass the Paycheck Protection Program and Health Care Enhancement Act with additional funding for PPP, Hospitals, and Testing. After I sign this Bill, we will begin discussions on the next Legislative Initiative with fiscal relief….

Donald J. Trump @realDonaldTrump….to State/Local Governments for lost revenues from COVID 19, much needed Infrastructure Investments for Bridges, Tunnels, Broadband, Tax Incentives for Restaurants, Entertainment, Sports, and Payroll Tax Cuts to increase Economic Growth.

It is unclear how rapidly Pelosi may pursue another coronavirus emergency relief measure, though she may be encouraged to proceed more quickly if she can negotiate a deal directly with the Trump administration and exclude McConnell. Treasury Secretary Steven Mnuchin has shown a willingness and some skill in negotiating successfully with House Democrats on COVID-19 relief provisions and a possible infrastructure investment package.