The CARES Act – Coronavirus Aid, Relief, and Economic Security Act – as passed by Congress and signed by President Donald Trump in March defines its purpose as to provide “emergency assistance and health care response for individuals, families and businesses affected by the 2020 coronavirus pandemic.”
It is by definition an Act on the whole as a result of the emergency caused by the pandemic. In fact, the word “emergency” appears in the Act over 750 times.
The head of the White House Office of Intergovernmental Affairs has issued guidance on who should administer the CARES Act funds. Governor Tate Reeves, quoting the official in his Tuesday press conference, read the statement from the White House aloud which said, “I have consulted with the U.S. Department of Treasury and based on their interpretation, the Coronavirus Aid, Relief, and Economic Security Act’s (also known as CARES Act) Coronavirus Relief Fund for State governments is intended to be administered by the Governor of each State.”
— Yall Politics (@MSyallpolitics) May 5, 2020
As such, Governor Reeves maintains that the response to this emergency is under his purview as the state’s chief executive, and thus he should be allowed to act with discretion in a manner previous chief executives of the State of Mississippi have over the 40 years the emergency statutes have been in place in state law. Governor Reeves has pointed to Hurricane Katrina and the BP Oil Spill as examples that come to recent memory.
The Legislature, specifically Lt. Governor Delbert Hosemann and Speaker Philip Gunn, disagree, stating that while the Governor has authority to act on behalf of the state in emergency situations, not all of the funds are left to the chief executive’s discretion in this instance. With that interpretation, what resulted on Friday of last week, and has since caused a rift between the two branches, is the stripping of the Governor’s authority to expend these emergency funds outside the legislative appropriations process from the CARES Act in lieu of future action by the Legislature.
Hosemann and Gunn have jointly announced today that the legislature will come back into session this Thursday to consider a legislative plan to address the COVID-19 recovery for small business.
Lawmakers view these CARES Act funds largely as reimbursements, with some seeing this as a means to direct spending in such a manner as to have their stamp on specific projects such as expanding broadband to enhance distance learning. However, the term “reimbursement” is found 35 times in the CARES Act and relates mainly to unemployment and testing expenses, and does not appear in the section related to the funds in question.
Legislators view the funds as not being specifically designated for use by the Governor as the state’s chief executive in the Act, meaning the Legislature is the appropriating body to control where and when the funds are spent.
That line of thought is in question given that it goes against the emergency nature of the overall CARES Act and specifically against the guidance provided by federal authorities tasked with administering these funds. In those documents, the assumption of an emergency is consistent throughout, as is the immediacy and uncertainty of the needs at hand.
The truth of the matter is that the monies states are receiving from the CARES Act are not political slush funds. They are targeted with restrictions that govern the manner and the pace that funds are to be spent. Whether the Governor or the Legislature ultimately makes the decision, the end result would arguably be 80-90% the same given those restrictions.
What’s happening in other states?
Similar battles have erupted in other states to varying degrees, and solutions are all over the map.
In Alaska, Gov. Mike Dunleavy and the Legislature have been embroiled in the “who gets to spend the funds on what” for weeks. Alaska Public Media has reported on the saga in mid-April, noting that the Legislature has given the Governor open-ended authority to accept federal funds for the Division of Public Health emergency programs to respond to COVID-19 through June but it hasn’t budgeted money for the state to respond to the pandemic’s effect on the economy. Lawmakers maintain that they have the power to spend money. The Alaska Legislature last met on March 29.
The Alaska Governor has since advocated for a legislative budget committee to give approval for the funds he needs, arguing that if the Legislature decides to reconvene, it will slow down how quickly Alaskans receive the money. “The chances of this money getting out quickly to assist municipalities and businesses and individuals — that becomes a problem, because the process takes a long time,” Dunleavy said in a press conference as reported by Alaska Public Media.
In New Hampshire, Democratic lawmakers challenged Gov. Chris Sununu’s authority to allocate the federal funds, taking the Governor to court since they believe the Legislature to hold “the power of the purse” even in this instance, according to Courthouse News Service. A judge ruled that the plaintiffs, who filed on behalf of the state Legislature, failed to show that they had any standing in court beyond their status as taxpayers, and as taxpayers, they failed to show that they had any standing to oppose the Governor’s discretion in disbursing federal funds.
The New Hampshire Governor has maintained that he has the authority to expend the federal funds, saying in the wake of the ruling, “In this unprecedented public health emergency, it is paramount that we get relief out to New Hampshire families fast, and that is what I am determined to do.”
In Sen. Mitch McConnell’s home state of Kentucky, which features a Democrat Governor and a Republican legislature, the power to spend a portion of these funds is held in the Governor’s Emergency Education Relief Fund.
What the CARES Act says and what guidance is coming from the federal government
The tranche of monies in dispute comes in the form of the Coronavirus Relief Funds included in the general CARES Act. A portion of funds were designated to and received by states based on their populations, with each state receiving at a minimum $1.25 billion as part of the $150 billion from a Coronavirus Relief Fund. Those funds were appropriated by Congress and were authorized to be administered by the U.S. Department of Treasury.
Mississippi received the minimum amount of $1.25 billion.
The Act amended the Social Security Act in Title V, Section 5001 and added Title VI, Section 601, outlining the allowable uses for these funds appropriated by Congress. It states:
“A State, Tribal government, and unit of local government shall use the funds provided under a payment made under this section to cover only those costs of the State, Tribal government, or unit of local government that (1) are necessary expenditures incurred due to the public health emergency with respect to the Coronavirus Disease 2019 (COVID-19); (2) were not accounted for in the budget most recently approved as of the date of enactment of this section for the State or government; and (3) were incurred during the period that begins on March 1, 2020, and ends on December 30, 2020.”
Under those broad considerations, the Treasury Department at the direction of Secretary Steven Mnuchin, has handed down guidance to state and local governments to assist them in the proper use of the funds. In its April 22 guidance, the Treasury Department makes it clear that, “The requirement that expenditures be incurred ‘due to’ the public health emergency means that expenditures must be used for actions taken to respond to the public health emergency.”
The assumption here is that the funds appropriated by Congress, administered by the U.S. Treasury Department and issued to the states were designated for response to the emergency at hand. In fact, “emergency” is used in the guidance 15 times.
The term “reimbursement” is used twice in the guidance, and both are when considering actions that would not be eligible for funding under the Act, specifically, “expenses that have been or will be reimbursed under any federal program, such as the reimbursement by the federal government pursuant to the CARES Act of contributions by States to State unemployment funds,” and “Reimbursement to donors for donated items or services.”
The guidance goes on to define the “nonexclusive examples of eligible expenditures.” Included are Medical, Public Health, and Payroll expenses, as well as expenses for facilitating compliance with public health measures and economic support. Some examples include: emergency medical response expenses, including emergency medical transportation; expenses for establishing and operating public telemedicine capabilities for COVID-19 related treatment; expenses for acquiring and distributing PPE; and expenses related to providing technical assistance to local authorities.
Also included in this Treasury guidance to “respond to the public health emergency” as allowable are expenses related to facilitating distance learning, improving telework capabilities, maintaining prisons, and providing grants to small businesses in response to the COVID-19 response.
Nowhere in the guidance does it make the distinction between who in the state is responsible for these funds, whether it is the chief executive or the legislature but the implication of the emergency is a theme throughout.
However, subsequent guidance provided by the Treasury Department on Monday, May 4th, through an updated FAQ does reference the chief executive when referring to how Coronavirus Relief Funds can be expended concerning payroll.
It states, “The Fund is designed to provide ready funding to address unforeseen financial needs and risks created by the COVID-19 public health emergency. For this reason, and as a matter of administrative convenience in light of the emergency nature of this program, a State, territorial, local, or Tribal government may presume that payroll costs for public health and public safety employees are payments for services substantially dedicated to mitigating or responding to the COVID-19 public health emergency, unless the chief executive (or equivalent) of the relevant government determines that specific circumstances indicate otherwise.”
Once again, it refers to the “emergency” nature of the use of the funds, referencing “emergency” 33 times in this guidance. “Reimbursement” is not mentioned in the most recent guidance.
Governors acting as their state’s chief executives are taking a strong position on these funds out of immediacy and fluidity. They are the ones dealing with day-to-day operations amidst the uncertainty this pandemic and the ever-developing federal guidance presents.
Lawmakers, on the other hand, are exerting their statutory authority of appropriating monies that, under normal circumstances apart from an emergency, would follow the sausage making process of legislating. They do not have the added daily pressures of managing agencies and executing the guidelines being handed down from the Treasury Department.
What’s at play in Mississippi?
With Republican legislative leaders and the Governor dug in on their positions relating to these funds, a veto is expected in the days ahead. What is becoming more plausible is the possibility that the third branch of government – the judiciary – may be called in to settle this disagreement.
At the end of the day, this is a process and not a policy fight. This is a disagreement over constitutionality, which may not be crystal clear. There is clear precedent for disaster emergency spending supporting Governor Reeves’ argument. However, in theory the legislative branch has the “power of the purse”, which is where Lt. Gov. Hosemann and Speaker Gunn are hanging their hats, just as are lawmakers in other states.
How this clarification from the White House impacts the debate will be seen in the days ahead.
Whether there is a veto and whether or not it is upheld or overturned is likely not a true indication of what lies ahead on policy matters for the relationship between Reeves, Hosemann and Gunn. But right now, it is heated and everyone seems to be intent on winning this political fight at all costs, at least in the short term.
Democrats are relishing their role of having enough votes to either help sustain or overturn a veto and having real political chips to play for the first time in a while. Republicans, however, are left scratching their heads and hoping this episode is short lived and won’t result in a roll back of hard fought conservative policy wins and elected numerical advantage.