On Tuesday, Democrats in the House of Representatives unveiled their second round of coronavirus stimulus funding, a roughly a $3 trillion bill called the “Health and Economic Recovery Omnibus Emergency Solutions Act“ (“HEROES Act”). Subsequently, late Friday evening, the House narrowly voted to approve the measure – H.R. 6800 - by 208 to 199 (the final vote fell mostly on party lines with nearly all Democrats voting to approve and all but one Republican opposing). The current version of the HEROES Act is expected to stall in the U.S. Senate, facing resistance from Senate Republicans and the White House. The legislation includes $1 trillion for states and local governments, among a number of other large components (direct payments, continuation of enhanced unemployment benefits, etc.). The bill does not include liability protections over pandemic-related lawsuits, which Senate Majority Leader Mitch McConnell (R-Kentucky) has said must be in any future legislation. Find a one-pager on the HEROES Act here, a resource on the state and local relief provisions here, a section-by-section summary here.
RCRC priorities in the HEROS Act include:
State and Local Funding
The HEROES Act provides more than $1 trillion to state and local governments, including $915 billion in flexible aid—which can be spent for any purpose, including to backfill revenue losses—in installments over the next year. The funds are allocated in four tranches: by jurisdiction (i.e., the same amount to each state), by population, by COVID-19 caseloads, and by unemployment. The jurisdictional and population-based distributions of $667 billion can be calculated now and will not change. The remaining $248 billion cannot be allocated yet, as it will depend on health and job statistics as of the spring of 2021. According to the Tax Foundation, California is estimated to receive $20,056,428,415 for state aid and $53,731,591,473 for local aid.
The HEROES Act provides $1.5 billion through the Federal Communication Commission’s E-Rate Program for schools and libraries to purchase hot spots and “connected devices” to help facilitate distance learning throughout the length of the emergency. The measure also creates a pool of $4 billion to provide up to $50-a-month subsidies to low-income families or laid-off and furloughed workers in order to help pay their internet service bills throughout the end of the pandemic.
Cannabis banking legislation was included in the HEROES Act, drawn directly from the SAFE Banking Act, which passed the House with bipartisan support in September. Ed Perlmutter (D-Colorado), chief sponsor of the stand-alone bill that is being included in the new broad package, previously raised the issue in a Democratic Caucus meeting and said House Speaker Nancy Pelosi (D-San Francisco) supported it. Senator McConnell has disparaged House Democrats for including cannabis banking language in their latest coronavirus relief package, calling the proposal "not something designed to deal with reality." Even supporters of cannabis banking have questioned whether it should be a priority during a public health crisis. Senator Kevin Cramer (R-North Dakota) stated that while the SAFE Banking Act is good policy, “this Covid-19 relief package is not the place for it.”
The HEROES Act would allocate $15 billion for state departments of transportation (DOTs) to retain workers and continue infrastructure projects. It would also give more than $15 billion to public transit grants, including $750 million in grant funding for some rural intercity bus service providers. House Transportation Committee Ranking Member Sam Graves (R-Missouri) criticized the infrastructure sections of the bill as “costly and partisan.”
The HEROES Act eliminates the $10,000 itemized deduction cap on state and local taxes for 2020 and 2021. This provision is likely to be removed in future rounds of negotiations because it is unrelated to the coronavirus pandemic. Furthermore, like many other provisions in this Democrat proposal, Senator McConnell has also criticized this provision, tweeting “House Democrats’ huge new bill would cut taxes for blue-state millionaires…This is their effort at coronavirus relief?”
Public Payroll Credit
The HEROES Act would allow state and local governments to claim the new employee retention credit created in the March CARES Act by allowing employees to use it to offset a greater share of workers’ pay. The legislation would also expand and extend tax subsidies designed to offset the cost of employees offering their workers family and medical leave.
United States Postal Service
The HEROES Act provides $25 billion for revenue forgone due to the coronavirus pandemic, plus language providing additional protections to postal workers. Additionally, $15 million is provided for the Postal Service Inspector General for oversight of this funding.