Comparison of House and Senate COVID Relief Fund Distribution to Local Governments

As the economic impacts and costs of the pandemic continue to grow, increasingly stressed local governments are urging access to their share of the $2.19 billion in federal funds Minnesota received through the CARES act.  Legislation arose in the waning days of session as both the House (HF 4673, Marquart) and the Senate (SF 4564, Rosen) offered their plans on how $667.2 million should be distributed across the state.   Despite the differences in the bills, the House and Senate appear unified in wanting to have a direct say in this decision-making.  The question is will they.

Coronavirus Relief Fund: Local Aid Distribution Proposals

The bills reveal some interesting differences to consider.  Both bills exclude Ramsey and Hennepin counties whose shares came directly from the federal government, but then the divergence begins: the House bill also excludes cities and towns under 500, while the Senate bill does not.  The rationale behind the House version is that residents from these smaller communities will be receiving most core services from their county or nearby larger cities.  The House bill does provide for the cities and towns under 500 population to apply for aid from the county if impacted. The House bill also attempts to establish more preference in the legislation by defining “emergency financial assistance” and “economic support” for allowable uses of the funds.  The Senate takes the approach of getting all the money out as quickly as possible to all local governments in the belief that all are impacted in some way, even establishing minimum amounts for very low population communities without any direction or guidance beyond the federal requirements.

The Senate delivers all $667 million through their formula which is more generous at each level of government, while the House holds $100 million for the commissioner of revenue to distribute later based on COVID-19 outbreaks and related functions that add costs for local government that will be determined through grant applications.  The Senate bill also directs Hennepin and Ramsey counties to distribute portions of the $317 million to cities and towns in the counties based on the formula established for the other 85 counties, while the House does not.

The Senate bill also establishes two specific funds in the state treasury: one to place the federal relief funds into; and another that creates a workers’ compensation COVID-19 reimbursement fund.  The Senate bill then appropriates an additional $375 million from the federal relief specifically to the new workers’ compensation fund.

Runs were provided of the distribution to counties, cities and towns under each bill:

House File 4673 County Distribution
House File 4673 City Distribution
House File 4673 Town Distribution
Senate File 4564 County Distribution
Senate File 4564 City Distribution
Senate File 4564 Town Distribution

Are These Bills Moot? 

The question is whether these bills even matter.  While administration officials have continually emphasized the importance of seeking advice from and working with the Legislature, Governor Walz has the authority to distribute these funds without legislative consent. 

The commissioner of MMB is still required to submit a request to the members of the Legislative Advisory Commission (LAC) for review and recommendation on the expenditure of federal funds.  The commission can use that process to call for further review and can make a positive or negative recommendation. We would expect the contents of these two bills to be represented in the review of whatever the governor requests.  But the LAC does not have authority to halt allotment after the request has been made.

At a Ways and Means hearing, Commissioner Bauerly offered an outline of what the governor's preferred approach would look like:

  • Provide the $667 million of local support per federal distributional guidelines
  • Send about half out now on a per capita basis to 85 counties (excluding Hennepin and Ramsey whose shares came directly from the federal government) and "other jurisdictions" (unclear how townships and small cities might be treated)
  • Reserve approximately $330 million for a future "need based allocation" based on how the health and economic impacts evolve with the virus in the state

Retaining half the money offers additional flexibility in responding to future COVID developments but also some potential state budget balancing benefits.   One beneficiary of a future "need based allocation" pool could be the state itself since the local share is guidance only.   It's likely another reason why legislators are pushing to get as much of the full $667 million out to their local governments now.

Everyone recognizes local governments are hurting and time is of the essence.  Since the House and the Senate are not yet on the same page with their distributional designs, that would seem to strengthen the Governor's position in acting unilaterally.  According to the Strib, the administration had no comment Tuesday "on whether it will also start distributing money next week, and whether legislators would be involved with shaping the guidelines"  

Legislators have already expressed concern about the nature of executive orders and the use of executive emergency powers.   If the money does goes out without the Legislature's formal involvement, it will be interesting to see what kind of hangover this would create for special session deal-making.