What’s included in the new federal coronavirus aid and what was left out?
The $900 billion bipartisan COVID relief agreement just passed by Congress provides substantial, urgently needed relief to Hawaiʻi’s families through at least the first quarter of 2021. The short timeline is worrisome and several other crucial items were left out of the final deal. Here’s a summary, starting with what’s still missing.
What wasn’t in the bill?
State and local help with budget deficits. The lack of direct relief for state and local government deficits is very disappointing as its absence is likely to significantly slow economic recovery efforts. The economic effects of the pandemic—the collapse in travel, temporary or permanent business closures, spiking unemployment, increased needs for health and human service supports—will continue to result in lower tax collections and higher demand for help from public programs.
Many of the appropriations listed below will help states and local governments keep service levels up and will even help with tax revenue, but federal relief should also have been provided directly to the state to offset deficits and help rev up the economy. Economic research supports the importance of public spending when private sector business activity shrinks. Every dollar that helps expand public employment and services typically adds $1.50 to economic activity. The need for more robust public spending in Hawaiʻi will probably extend through 2021 and beyond.
Possible help in future from the Fed. One holdup in passing the relief bill was over future emergency lending programs through the Federal Reserve (the Fed). The eventual agreement was that the lending program made available to states and cities will expire as scheduled at the end of 2020 and a similar program will not be offered. It does leave the possibility, though, that some other aid program could be devised if needed in future.
No help for pending student loan payments. In March, the CARES Act provided a respite from payment on government-sponsored student loans and froze interest and collection efforts, like garnished wages. The payment moratorium was extended from its original expiration date of September to the end of December and then to January 31, 2021, to give Congress more time to provide further help. Unfortunately, the bill that just passed does not extend the date any further. There is a possibility that repayment might be delayed again when President-elect Biden takes office, since President Trump extended the date when it was set to expire in September and again at the end of December.
What is going to help Hawaiʻi families?
Although the bill didn’t directly address state and local budget deficits, the boost in benefits that were approved, summarized below, will do some good for the state budget since some of the benefits are taxable and all of them help support economic activity. Counterintuitively, in October the Council on Revenues found that Hawaiʻi’s total personal income was expected to increase in 2020 due to CARES Act payments like the weekly unemployment payment bump of $600, the Paycheck Protection Program loans/grants to small businesses, and the stimulus checks sent out to most families. Here’s what’s new:
Unemployment. Hawaiʻi’s jobless workers will get an extra $300 per week in unemployment benefits through March 14, 2021. The weekly bump-up could be $400 for workers who earned at least $5,000 in self-employment income in 2019 in addition to wages, but only if the state opts in. That may be difficult for Hawaiʻi to pull off because it would require a change to the administrative support system for Unemployment Insurance (UI). Self-employed and gig workers who have exhausted state benefits will also get extended help. This is one of the most crucial pieces of the bill for Hawaiʻi, where we’ve gone from having one of the lowest unemployment rates to the highest in the nation in the past year. Earlier federal unemployment relief provided more than $2 billion to Hawaiʻi’s struggling workers and to our economy.
Paycheck Protection Program. Despite reports that some of the Paycheck Protection Program (PPP) funding appropriated last March was siphoned off by large or otherwise inappropriate businesses, the program has provided a lifeline to many businesses and their employees. Hawaiʻi had a good record of securing funding in the first two rounds of disbursements ($2.5 billion were awarded to local businesses then) and local businesses should be able to take advantage of the next round. On the downside, the aid is expected to cover less than three months of payroll costs, while recovery is likely to take months longer.
Stimulus payments. Hawaiʻi households got more than $1.2 billion in stimulus payments earlier in the year. Now, up to $600 per family member will be sent out to households with incomes up to $75,000 per individual/$150,000 per couple. The Institute on Taxation and Economic Policy estimates that 90 percent of adults and 91 percent of children in Hawaiʻi will benefit from the new stimulus payments. This time many immigrant families, who were left out of the last stimulus, will get a check. It is important to note that stimulus payments are good for the economy if people go out and spend them in our communities. They are of less value if they aren’t spent promptly and locally.
Medicaid for COFA. Federal welfare reform in 1996 barred Medicaid coverage for migrants from the Pacific who are welcomed under the Compacts of Free Association. Although the state was able to continue to get federal matching funds to cover children and pregnant women in Medicaid, many COFA adults were left out. The pandemic exposed the vulnerability of many of these residents whose rates of illness and death due to COVID-19 have been disproportionately high. Without the security of Medicaid eligibility, the economic and personal costs have also been high. At long last, the 1996 error has been fixed.
Food assistance. The new federal relief package includes $13 billion to increase SNAP (Supplemental Nutrition Assistance Program, formerly known as food stamps) benefits by 15 percent. Hawaiʻi’s SNAP benefits up to this point were expanded by more than $250 million. SNAP expenditures earn a “best bang for the buck” rating for public programs because funds are spent in local stores where they support jobs and other economic activity. Hawaiʻi farmers might also get some of the $13 billion available to help with pandemic-related production losses.
Rental aid and eviction ban. The new bill includes $25 billion in federal rental aid and extends the eviction ban, although only through the end of January. Hawaiʻi is expected to receive $200 million—much needed help to renters housed during 2021.
Schools, universities and childcare. Some $58 million in CARES Act funding helped students and added to health and safety precautions, but did little to shore up the finances of institutions of higher education in Hawaiʻi earlier in the year. Proposed state budget cuts for public education and the University of Hawaiʻi System could be offset with an additional $82 billion for colleges and universities in the newly-passed bill. Another $58 billion will be available for K-12 education (Hawaiʻi K-12 CARES Act funding in 2020 amounted to about $84 million). Emergency money will also help out childcare programs, which are essential to helping parents return to work (Hawaiʻi got nearly $30 million for childcare and preschool in 2020). The Center for Law and Social Policy estimates that Hawaiʻi will get an additional $34.8 million from the new measure.
The bill also restores access to Pell grants for incarcerated students and repeals a ban on federal financial aid for college students convicted of a drug crime, and reportedly simplifies financial aid applications.
Finally, while it may not benefit Hawaiʻi directly, another good boost for education included in the bill is the appropriation of an additional $1 billion in aid for historically Black colleges and universities.
Broadband. We recognize more than ever the necessity of good access to reliable broadband service and this bill adds $7 billion to help expand it. Specific appropriations include $300 million for rural broadband expansion and $250 million for tele-health. Hawaiʻi has so far used $12 million in Coronavirus Relief Funds for broadband and tele-health.
Vaccines and testing. Hawaiʻi will receive help to purchase COVID-19 vaccines and will be able to continue testing and tracing with new federal money. Earlier in the year, the CARES Act provided Hawaiʻi with $35 million for public health and prevention, while Coronavirus Relief Funding has gone to purchasing personal protective equipment ($80 million), COVID-19 testing and contact tracing ($251 million), and related public health expenses ($99 million).
Military pay raise. Congress included a 3 percent increase in pay for members of the military. In addition, federal civilian employees will get a modest pay bump of 1 percent in 2021. Both of these actions should provide some stimulus to Hawaiʻi’s economy due to our high volume of military personnel and associated civilian contractors.
Extension of Coronavirus Relief Fund spending. Hawaiʻi received $1.25 billion in Coronavirus Relief Fund (CRF) money that was to have been spent by December 30, 2020. The state was allocated $687 million and, as of December 14, 2020, had spent only half (Governor Ige has said the state is still planning to spend it all by the end of 2020). The City and County of Honolulu, meanwhile, got $387 million and had spent 70 percent by the 14th; Hawaiʻi County got $80 million and had spent 80 percent; Maui County got $67 million and had spent 78 percent; and Kauaʻi County got $29 million and had spent 73 percent.
Fortunately, the federal action now allows CRF money to be paid out through December 31, 2021, which gives our state and local governments far more breathing room to get the money to where it’s needed most. The extension should also give state and county decision-makers pause to re-examine current spending plans. For instance, some of the CRF money could be re-deployed to other high needs to avoid duplicating new funding just appropriated for vaccines and testing, broadband, and other specific services.
Tax breaks. Several eyebrow-raising federal tax breaks were also rolled into the bill, such as a two-year tax break for “business meals.” However, another tax break helps maintain an important payroll tax subsidy to help employers offer paid sick leave to their workers. In addition, the bill boosts the Earned Income Tax Credit, one of the most effective tools to fight poverty for working families with children.
