Congress passes the American Rescue Plan after multiple delays

Following the Senate’s passage of the American Rescue Plan by a razor-thin margin on Saturday, March 6, 2021, the House of Representatives approved the final version of the new stimulus package on March 10, 2021, despite multiple attempts to delay. The economic relief package has been highly contested since its introduction and highlights the continued divide between the political parties. President Joe Biden praised the Senate’s passage of the legislation as a “giant step forward” while other Republican leaders criticized the $1.9 trillion package, including Senator Ron Johnson, who called it a “boondoggle for Democrats.” In any case, the stimulus package will provide, what many people believe to be, long overdue and much needed assistance to the American people and businesses. The following provides a summary of various relevant provisions of the new legislation and what individuals, educational entities, and state and local governments can expect.

Extension of unemployment benefits

After the threat of losing unemployment benefits at the end of 2020 and a looming March 14, 2021, expiration date, the stimulus package now includes an extension of federal unemployment benefits. Individuals will continue to receive $300 per week in enhanced unemployment benefits until September 6, 2021.

Funding to state and local governments

State, territories and tribal governments are expected to receive approximately $220 billion in aid and economic assistance to alleviate the loss of tax revenue during the pandemic. $195 billion of such aid shall be reserved for each of the 50 states and the District of Columbia, $25 billion of which will be allocated equally. The remaining funds shall be allocated based on the proportion of each state’s estimated number of seasonally-adjusted unemployed individuals of a three month period ending with December 2020 to the average estimated number of seasonally-adjusted unemployed individuals in all 50 states and the District of Columbia over the same time period. The aid may be utilized for costs incurred up until the end of 2024 and may be used for expenses related to:    

• Responding to the public health emergency with respect to COVID-19 or its negative impacts, including assistance to households, small businesses, or aid to impacted industries such as tourism and travel.
• Providing premium pay to essential workers.
• Investing in water, sewer or broadband infrastructure.

States and territories may not use the funds to directly or indirectly offset any reduction in the net tax revenue or to deposit money into any pension fund. States, territories and tribal governments that receive funding will be required to provide detailed accounting for the use of the funds and any other information the Secretary of the Treasury may request.

States, territories and tribal governments will also receive a cumulative $10 billion to carry out critical capital projects to better enable work, education, health monitoring and additional remote options during the pandemic.

In addition to the aid directed solely to individual states, approximately $130 billion has been allocated to make payments to metropolitan cities, local governments and counties to mitigate the loss of revenue and negative effects of COVID-19. Under this allocation, metropolitan cities will receive $45 billion, local governments will receive $19 billion, and counties will receive $65 billion. Similarly, to the state requirements, metropolitan cities, local governments and counties may only use the funds to cover costs incurred by December 31, 2024.

Aid to small businesses

The new legislation authorizes the allocation of $10 billion to support small businesses that continue to battle the negative effects caused by the pandemic. The funding is intended to ensure that businesses owned and controlled by socially and economically disadvantaged individuals have access to proper funding and the resources needed to successfully apply for and navigate through the various support programs. Included in the funding is $500 million specifically set aside for “very small businesses” which includes businesses with fewer than 10 employees or independent contractors and sole proprietors. States will also be authorized to utilize a portion of the funds allocated to develop and provide legal, accounting, and financial advisory services to certain small businesses applying for state and federal programs.

In addition to aid generally available to small businesses, certain restaurant entities, including but not limited to, restaurants, food stands, food trucks and bars will be eligible to receive funds through the newly implemented $28 billion Restaurant Revitalization Fund. Eligible entities may use the funds for payroll costs, mortgage obligations, rent payments, utilities, maintenance expenses such as construction to accommodate outdoor seating, protection equipment and cleaning supplies, and food and beverage expenses within the scope of normal business practices.

Educational funding

In an attempt to better combat and address the multitude of issues K-12 schools have faced during the pandemic, approximately $122 billion has been set aside to allow school districts to pay for various coronavirus relief measures. Local education agencies that receive funds shall reserve at least 20% of such funds to “address learning loss through the implementation of evidence-based interventions, such as summer learning or summer enrichment, extended day learning, comprehensive afterschool programs, or extended school year programs.” Any remaining funds may be used for various other initiatives, such as:  

• Activities to address the unique needs of low-income children and students, children with disabilities, and racial and ethnic minorities.
• Developing procedures to improve COVID-19 preparedness and response efforts.
• Purchasing additional supplies to sanitize and clean educational facilities.
• Implementing activities during long-term closures, including providing meals to students and technology for online learning.
• Providing mental health services and support.
• Addressing learning loss among students caused by the pandemic.
• Other activities that are necessary to maintain the operation and continuity of local educational agencies.

Although the receipt of funds is not predicated on the school reopening, all local educational agencies receiving funds must develop and make publicly available a plan for the safe return to in-person instruction within thirty days of receiving such funds.

In addition to the funding allocated to K-12 public schools, approximately $39 billion has been allocated to institutions of higher education. The allocated funds may be used for initiatives such as monitoring and suppressing the spread of coronavirus or conducting outreach to financial aid applicants about the opportunity to adjust their financial aid.

The new legislation also contains provisions addressing revisions to the Affordable Care Act, vaccine funding, and tax credits for children. The full text of the legislation can be found, here.

McDonald Hopkins attorneys are reviewing the specific provisions included in the legislation and analyzing the impact to our clients. We will be providing further updates and information on any action you or your business needs to take.