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COVID relief bill offers Minnesota budget officials a deadline reprieve (for whatever that’s worth)

State and local governments didn’t get a hoped-for second infusion of money in the $900 billion COVID relief package passed by Congress earlier this week, but they did get word that they didn’t have to spend CARES Act money within the calendar year.

State Budget Director Britta Reitan shown speaking during a May 5 press conference.
State Budget Director Britta Reitan shown speaking during a May 5 press conference.
Glen Stubbe/Star Tribune/Pool

Ever since Minnesota got word this spring that it, along with every other state, would be receiving a massive check from the federal government to respond to the COVID-19 pandemic, one rule was front of mind: Spend it by Dec. 30 — or give it back.

Every expenditure from the state’s $1.87 billion share of CARES Act money was designed with that in mind. Rental and mortgage assistance had to be applied for by early in December to give the state time to get payments out by year’s end; local governments had to spend or return their share of $841 million by December; nonprofits and other organizations that received money for meals, shelter and child care had to show that it was spent by year’s end.

Now, with that deadline just days away, state budget managers have been told by Congress that, well, never mind. Though state and local governments didn’t get a hoped-for second infusion of money as part of the $900 billion COVID relief package passed by Congress earlier this week, they did get word that they didn’t have to spend their CARES Act money within the calendar year. The deadline is now Dec. 30, 2021.

Thanks for nothing?

Mostly, perhaps, but not completely. Britta Reitan, assistant commissioner of Minnesota Management and Budget and the state budget director, said much of the work to meet the previous deadline has already been completed, though MMB used a different accounting method to allow some of the federal money to be spent next year. 

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A series of requests made Dec. 17 to the Legislative Advisory Commission were meant to “maximize the CARES Act dollars,” Reitan said. “Where we thought we would have been underspending in certain areas, we requested to reduce the allocations we have previously made.” 

That money was then used to reimburse another fund of state dollars — the COVID-19 Minnesota Fund — which had been set up in April with a $200 million appropriation from the Legislature to cover then as-yet-unknown costs for responding to the pandemic. That fund has different restrictions from the federal money, including a requirement that money be allocated by the end of the year but not spent.

The purpose of all of these actions were to “make sure that we were maximizing the use of the (federal funds) and freeing up dollars in the state COVID Minnesota Fund,” she said. In other words, the state acted to avoid having to return money to the federal government, therefore having it available for other pandemic-related costs

The state has also been reimbursed by the Federal Emergency Management Agency for much of one high-profile purchase from the state fund. FEMA has granted the state $4.125 million, or 75 percent of the cost of purchasing a former produce warehouse for an emergency morgue that has so far not been used. When the FEMA money and the federal fund to state fund transfers are complete, the state COVID fund will have $82 million. Reitan said that money will likely go toward additional support for COVID-19 testing and for the rollout of vaccines into 2021.

That’s not to say the change in the CARES Act deadline does nothing to help the state budget staff, Reitan said. MMB made a request Wednesday to the Legislative Advisory Commission to allow it additional flexibility in spending funds that won’t meet the old deadline. “There are some grants where we still think there will be difficulty in getting it done by 12-30,” she said. “Or there might be value in spending it in a more thoughtful and drawn-out way into the next calendar year. We’re trying to be strategic in where we ask for that.”

Examples are grants for testing, long-term care facility supports and K-12 mental health providers. (State law requires MMB to inform the Legislative Advisory Committee of uses of federal funds. While they are posed as “requests,” they do not require the commission to give approval. After 10 days, governors can spend the money regardless of commission opinions, which has caused some friction between GOP lawmakers and Gov. Tim Walz.)

Trying to provide some flexibility

Complicated? Yes. Which is why MMB created a special office of accountants and compliance officers to work on accounting for the federal CARES Act money that flowed to the state. 

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The CARES Act is flexible in what money can be spent on, but it demands detailed reporting from the states, large counties and tribes as well as the “sub-recipients” that received money from those “prime recipients.” The state last week finished its report for the first six months of the pandemic. Like all of the states’ reports, it will be published on a webpage set up to track CARES Act spending.

The CARES Act was very flexible in how states spent money as long as it wasn’t used to replace lost tax revenue. If it came after March 27 and could be connected to the impact of the pandemic, it was likely permissible. In addition to 18 general categories of spending, there was another called “other,” said Amy Jorgenson, the director of the state’s COVID-19 Response Accountability Office. 

“The intention was to provide a lot of flexibility to states and local governments around this,” Jorgenson said. For example, the money can be used for payroll costs for workers who are responding to the pandemic such as public health workers, police and fire, and economic development officers helping businesses cope with losses.

The state has spent its allocation on rental and mortgage assistance, food shelves, housing for homeless people, small business grants, hospital and testing supplies, child care support, help for schools to reopen safely and dozens of other expenditures.