It's been over six months since the CARES Act- or the Coronavirus Aid, Relief, and Economic Security Act - was signed into law. Many know some basics about Act, like that it brought over $2 trillion in financial aid to American citizens and businesses. Or perhaps you knew about the CARES Act because of the $1,200 checks that landed in your mailbox. However, there’s still a lot of information about the CARES Act the average citizen might not know, so we wanted to give folks a quick summary the different divisions of the Act.
Great graph, right? Now let’s break it down. The individuals portion drew the biggest share of the total CARES Act funding. The biggest portion of this pool was allocated to the $1,200 stimulus checks, but changes made to unemployment via broadening benefits and eligibility also drew from this pool. Another advantage in this category many don’t know about is that it added a new requirement for health insurers to cover COVID-19 testing, treatment, and any eventual vaccine.
A major goal of the CARES Act is meant to keep small businesses afloat and the government sought to get loans into the hands of small business owners as quickly as possible. The small businesses portion of the CARES Act is broken up into several parts as well. $10 billion was portioned as emergency grants to small businesses with less than 500 employees. The grant is only offered in one of the two types of CARES Act loans available to employers. If they choose to request the grant, the business gets access to $10,000 in immediate cash funds within 3 days of filing for the loan. Most importantly, the grant does not have to be repaid.
The majority of CARES Act aid to small businesses came in the form of a $350 billion loan program (up to $10 million per business) distributed by the Small Business Administration with any part of said loan used to maintain payroll, keep workers on the books or pay for rent, mortgage and/or existing debt being forgivable so long as employees stay hired through the end of June. There are currently two types of loans available: Economic Injury Disaster Loans (EIDL) and Paycheck Protection Loans (PPP). A business can apply for both loans, but they cannot use funds from each loan for the same expenses such as rent, payroll, or insurance. The last $17 billion was allocated for six months of payments to small businesses already using SBA loans.
Receiving significantly more than the small businesses from the CARES Act were the large corporations who were allocated $500 billion. But unlike small businesses all of the corporation financial aid came in the form of loans. More importantly, the money also came with reporting requirements, stock buyback bans, and a newly formed inspector general and oversight committee. One of the major industries that required this federal assistance were the airlines which took about 8.6% of the total $500 billion.
Another part of the CARES Act stipulated that if a business had to shut down or was in distress, regardless of size, they would receive a fully refundable tax credit intended to get employees hired back or put on paid furlough and eventually hired back. The credit covers up to 50% of payroll on the first $10,000 of compensation, including health benefits for each employee. For employers with more than 100 full-time employees, the credit is for wages paid to employees when they are not providing services because of COVID-19. Eligible employers with 100 or fewer full-time employees could use the deduction even if they weren’t closed.
$153.5 billion of the CARES Act was allocated to public health, which breaks down to
The public health portion is also meant to boost hiring for vital health care jobs and to speed up the development of a vaccine, treatments and faster diagnoses. The CARES Act also reauthorized a telehealth program to extend the reach of virtual doctors’ appointments.
The safety net bubble in the graphic relates to government food programs and includes $8.8 billion for increased public school meal flexibility, $15.5 billion for the Supplemental Nutrition Assistance Program (SNAP or Food Stamps), and $450 million for food banks. American Indian reservations, Puerto Rico, the Northern Mariana Islands and American Samoa also received additional funds and access to these federal nutrition programs.
The CARES Act funding directly affecting our customers is the state and local governments portion which received $339.8 billion for programs. Those programs include
Many local and state governments did not automatically receive their CARES Act funding, and a large number of states put spending date restrictions on the funds. For example, Georgia state and local funds are only available if the expenditure is incurred between March 1, 2020 and December 30, 2020.
Lastly comes the second smallest bubble, the $43.7 billion allotment for education. The list of specific organizations that received a part of the total amount is extensive, but some of the efforts initiated by CARES in this area include a temporary deferment of federal student loans lasting until September 30th, the ability for schools to turn unused work-study funds into grants and continued work-study payments for suspended schools, a stop to the collecting on student borrowers in default by the Department of Education, and relief for school dropouts via deduction from their lifetime limits on subsidized loan and Pell Grant eligibility and the cancellation of the need to pay back any grants or other aid they've already received. (Source)
The CARES Act has worked, at least according to recent reports and studies. According to CNBC: “Americans set an all-time-high savings rate in April. And though a record number of Americans were out of work, poverty actually decreased slightly compared to 2019.” The Federal Reserve reported that ‘the extraordinary governmental measures in response to the pandemic seemed to have eased families’ financial strain.’ This has also been shown in a recent finding that the average Americans’ financial well-being is now higher in many ways, with adults reporting they now have funds to pay for an unexpected $400 emergency. (Source)
The CARES Act sounds mostly positive, but there are reasons to believe that another downturn could be looming, mostly due to an impasse in the legislature over another round of financial aid and the upcoming or already existent expiration of several CARES measures. Another major issue with CARES funding is the general lack of oversight at the large sums of money aimed at industry rescues with no guardrails to ensure that public funding is directed at saving the jobs, wages, and benefits of typical workers rather than the wealth of shareholders, creditors, and corporate executives. The Act does request industry bailouts to preserve jobs “to the greatest extent practicable”, but this is highly interpretive wording.
Stay tuned for an upcoming post detailing the State and Local distribution of the CARES Act and what that means to local governments.