Walz pushes back on Legislature’s COVID-19 aid package for local governments

Minnesota state senators of both parties were in a celebratory mood Tuesday while debating a bill to distribute $841 million of the state’s allocation from the federal CARES Act to Minnesota cities, counties and townships.

The money can be used to pay costs borne by local governments to respond to the coronavirus pandemic, such as public health, staff overtime and economic assistance like small business loans and rental assistance. While it cannot be used to make up for lost tax revenue and must be spent by the end of the year, it will be welcomed by cities and counties that have faced increased expenses from COVID-19.

Of the total, counties will split up $467 million, cities will get $350 million and townships $24 million.

The legislation, Senate File 47, passed 62-4 and is identical to a bill introduced with DFL sponsorship in the House.

Said prime sponsor Sen. Julie Rosen: “I think this is very fair and it’s very bipartisan.”

“Whether you’re in rural Minnesota or in the metro area, any government unit has to be pretty excited to see that this bill is being passed,” said Sen. Gary Dahms, R-Redwood Falls. “A lot of these folks have been stretched pretty thin and this is money they’ve been waiting for.”

“I’m glad we’re doing our job,” said Sen. Karla Bigham, DFL-Cottage Grove. “This should have passed in regular session,” adding, “I do assume this will pass and get signed into law this week.”

Less thrilled was Gov. Tim Walz, who didn’t sound so sure that he would sign the bill as written. “We’re a little concerned about that proposal,” Walz said later Thursday. “We’re a little concerned about how that money is going to move. It’s a massive amount. We’re working out some of the details.”

One issue for Walz is simply the total amount being distributed. The $2.2 trillion CARES Act gave money directly to states and to local governments with more than 500,000 people. Minnesota received a total of $2.187 billion, with $1.87 billion going directly to the state government, while Hennepin County got $220 million and Ramsey County got $96 million. 

The federal law suggests — but does not require — that state’s distribute 45 percent of their money to local governments. 

The question, however, has been 45 percent of what? U.S. Treasury officials initially said the 45 percent should include the money sent to the two big counties, which would have left $667 million for other local governments in the state. That’s how much the House and Senate had planned to send out during the regular session.

But since then, the federal government has said the 45 percent should be calculated after deducting the Hennepin and Ramsey county direct grants from the state’s total $2.187 billion allocation. Doing it that way leaves $842 million to other local governments in Minnesota.

The other issue for Walz is basing the allocations on population, rather than need. During the regular session, Revenue Commissioner Cynthia Bauerly said the administration would like to use some of the local share, $100 million, to be set aside for grants to local governments based on specific needs. Should a hot spot appear, as it did in food processing plants in Nobles and Stearns counties, for example, the state could send extra money there.

But Walz doesn’t need the legislation to act. He has said he would like to work with the Legislature on issues such as CARES Act distribution and on rental- and mortgage-assistance funding for those impacted by the economic fallout from the pandemic. But under his peacetime emergency powers, he can do all that via executive order. Current law allows him to spend the CARES Act money after only giving notice to the Legislature.

“That is a possibility,” Walz said of acting alone. “I don’t want to throw that into this right now. There are some honest negotiations going on and we’re not that far apart in agreement that local governments need to get this.”

There are two notable downsides to Walz acting unilaterally. The number of senators voting yes was enough to override any veto by the governor, and the number of “yes” votes in the House is  expected to be as sizable. Whether his fellow DFLers would vote to override the governor is an open question, but it is possible should they feel pressured by local governments in their districts.

The second problem is that ignoring a legislative action would feed criticism by Republican lawmakers that Walz is exercising too much power under the state of emergency, and that his pledges to work with lawmakers are insincere.

Some of the math could also be helped if the federal government passes additional aid to states and cities. On Tuesday, Walz was on a call with Vice President Mike Pence, who said the Trump administration could support another federal aid package. The nation’s governors have asked for $500 billion for state and local government that could be used not just for COVID-related expenses but to replace lost revenue, something the CARES Act does not permit.

The “no” votes in the Senate Tuesday all came from Hennepin County DFL lawmakers – Sens. Scott Dibble and Bobby Joe Champion of Minneapolis, Sen. Chris Eaton of Brooklyn Center and Sen. Ron Latz of St. Louis Park.

Dibble noted that Wabasha County and Nobles County have the same population and therefore the same allocation of money but Nobles has 1,600 confirmed cases and Wabasha has 21.

“We know that communities are not seeing the impacts of COVID-19 equally,” Dibble said. “Our metro areas have seen very high numbers of cases, but there’s no recognition of the difference in cases. So it’s a population test, despite the huge variety of impact.

“It’s hard to look a gift horse in the mouth, but there is an inequity here that needs to be discussed,” Dibble said.

Rosen, the chair of the Senate Finance Committee, noted that Hennepin and Ramsey counties received direct appropriations from the CARES Act. In addition, her bill provides a larger share for those counties and their cities.

“There are desperate needs in every county. Every county has prepared for this public health emergency,” the Vernon Center Republican said. “And we can only hope and pray that they don’t have the issues that Stearns and Nobles and Hennepin and Ramsey have had. But they are prepared and they’ve had expenses.”