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Why the state of Minnesota isn’t sure how (or when) it will be able to spend federal COVID-19 response money

Because the money is being sent out in so many different chunks — and with varying degrees of guidance — those charged with spending and accounting for it aren’t exactly sure how it will help.

Management Budget Commissioner Myron Frans: “That’s part of the challenge. What are all of the funding sources, what are they gonna be used for, and how can they be deployed?”
Management Budget Commissioner Myron Frans: “That’s part of the challenge. What are all of the funding sources, what are they gonna be used for, and how can they be deployed?”
MinnPost photo by Peter Callaghan

Minnesota budget officials are pretty sure how much money the state is getting from Congress to help with the governmental response to COVID-19. They’re just not sure when they’ll get much of it — or how they can spend it.

A series of congressional actions, including the massive $2.2 trillion CARES Act, appropriated money for state and local governments, as well as transit agencies, school districts, colleges health care providers and individuals. But the money is being sent out in so many different chunks — and with varying degrees of guidance — that those charged with spending and accounting for it aren’t sure exactly how it will help.

A report by the Minnesota House Fiscal Analysis Department that was presented to the House’s Ways and Means Committee last week estimates that Minnesota could receive up to $3.775 billion, mostly but not exclusively from the CARES Act. The allocations range from $510,000 from the federal Institute of Museum and Library Services all the way up to $2.186 billion from the Coronavirus Relief Fund, which was established under the CARES Act. 

In addition to the money from the Coronavirus Relief Fund, half of which the state has already received, $367 million will flow to school districts and colleges; $135 million will go to various Health and Human Services programs; $18.3 million will pay for emergency food assistance and food stamps; $466 million for transit agencies and airports; $474 million for health care provider relief and hospital preparedness; and $65 million for housing assistance [PDF].

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“Most of those funding streams are awaiting guidance,” state office of Management Budget Commissioner Myron Frans said at a hearing of the Senate Finance Committee Tuesday. “That’s part of the challenge. What are all of the funding sources, what are they gonna be used for, and how can they be deployed?”

MMB has not completed an analysis of the impacts of the CARES Act and other federal aid, though it will be included in an updated forecast released on May 5, a spokesperson said. 

Minnesota has already appropriated $550 million in state funds since COVID-19 began appearing, money that’s gone for public health, hospitals, emergency shelters and child care. Some of those expenditures might be able to be backfilled with the federal money. At least, budget officials think they can.

According to the federal law, states can use the money for COVID-related costs incurred after March 1. It also says that the money can’t be used for expenses budgeted in any state’s currently approved budget. Britta Reitan, the state’s budget director, thinks the prohibitions apply to the two-year budget adopted last May but not the COVID-related amendments adopted in March and April.

Senate Finance Committee fiscal analyst Eric Nauman told the committee Tuesday he is still waiting for word from the U.S. Treasury and other agencies as to how the money can be spent. Without it, it is difficult to answer questions from lawmakers, he said.

“I think to be completely responsive to your questions would require a little bit more guidance from Treasury, which is what every fiscal analyst in the country is sitting around with bated breath waiting for,” Nauman said. “We’re looking for specific guidance on how the money exactly can be used. And there’s still a lot of unanswered questions.”

The next round of assistance from Congress is expected to be passed this week. While most of that will add money to the small business-focused Paycheck Protection Program, it will also contain money for hospitals and for COVID-19 testing. Some of the testing money will likely flow to the states and could pay back an estimated $40 million that the University of Minnesota and the Mayo Clinic have said they would need to ramp up testing in the state. 

In addition, the nation’s governors are asking for up to $500 billion to help state and local governments that are seeing expenses increase and revenues decline. President Trump recently tweeted that by agreeing on the latest bill, Congress and the administration could now proceed on talks to provide state and local government aid as well as an infrastructure spending plan.

Disagreement over need for new legislation

Tuesday’s Senate Finance Committee hearing showed early signs of a fight between the Republican-controlled Senate and the administration of Gov. Tim Walz. The committee’s chair, Julie Rosen, R-Vernon Center, has a bill (Senate File 4486) that would place all federal COVID money into a special account that would then have to be appropriated by an act of the Legislature.

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But Frans suggested that one of two existing alternatives to regular appropriations would be needed to move federal money quickly, especially when the Legislature is not in session. One was created in March, when lawmakers set aside $200 million for a COVID-19 Minnesota Fund. That law created a 10-member commission of lawmakers that could veto expenditure requests made by Frans, something the commission hasn’t done with the eight requests for money to respond to the crisis so far. 

The other is something called the Legislative Advisory Commission that reviews use of federal funds that come in outside the normal budget, such as for natural disaster relief. That process does not allow lawmakers to block expenditures, but it does require a time lag between notifying the commission and when money can be spent.

Neither of those options is satisfactory to Rosen, however. The COVID-19 Minnesota Fund commission is for a relatively small amount, $200 million, compared to the billions coming from the federal government, she said. And the Legislative Advisory Commission can’t block expenditures; it also doesn’t have membership from the minority parties in the House and Senate.

“This needs to have a thoughtful lens on it and the Legislature is set up to have those discussions and make sure the money is spent wisely,” Rosen said. 

She said some smaller amount could be put into an emergency fund that could be appropriated by the COVID-19 Minnesota Fund Commission to move quickly for emergency needs, but the bulk of the federal money should flow through the normal legislative budgeting process.

“That’s our job and we do it well and we’ve proven it over and over again,” Rosen said. “And we’ve proven we can be very quick and very nimble.”

Frans disagreed. “If there is federal funding that was not anticipated, there’s a process for that money to be used,” he said of the Legislative Advisory Commission. “The statute that is there, I agree, is not the most artfully designed statute, (but it) is there and it does provide a mechanism designed specifically for this situation.”

On Tuesday, SF 4486 passed out of the Senate Finance Committee on a party line voice vote. To change the current Legislative Advisory Commission process, the bill would have to be passed by the full Senate and the DFL-controlled House before the end of the regular session on May 19 and be signed by Walz.