$841M in federal COVID-19 aid for cities, counties tied up at State Capitol

Businesses in Minnesota's far southwest corner that closed during the COVID-19 pandemic have lost customers to South Dakota, schools have faced remote learning costs and community hospitals have been saddled with unexpected expenses.

And Rock County Administrator Kyle Oldre has waited.

About two months ago, Minnesota received nearly $1.9 billion from the federal government's CARES Act to help weather the pandemic. About 45% of the money was supposed to go to counties, cities and municipalities. They have yet to receive a cent.

"This is small town USA trying to survive, and the tools for their survival are in St. Paul. And they are not sending them out," Oldre said.

Lawmakers have clashed repeatedly over the best way to distribute the money between the metro area and greater Minnesota communities. Last week, before a special session, four key lawmakers reached a deal to get $841 million to communities across the state.

But the tenuous agreement could still fall apart. And with the Republican majority in the Senate planning to adjourn the special session Friday night, lawmakers have one day to sort out disagreements over the CARES Act money.

The remaining roadblock stems from a late effort by the House DFL majority to add amendments funding other legislative priorities. Democrats tacked on a list of spending items, including payments to tribes, more corrections spending, and additional funds for personal care attendants and the care and treatment of people with mental illness, chemical dependency or addiction.

The new proposals would add nearly $141 million to the general-fund tab. Many of the items are similar to the budget priorities Gov. Tim Walz pushed at the start of the regular session. But fund transfers and grants included in the DFL plan would offset the expenses, so that the general fund would end up seeing a more than $7 million boost, said House bill sponsor Rep. Paul Marquart, DFL-Dilworth.

He said the changes improve the chances that the CARES package will pass and be signed into law by Walz. Marquart noted that the governor wasn't involved in the deal between the four lawmakers.

But Senate Majority Leader Paul Gazelka, R-East Gull Lake, said Thursday that the House could end up killing the bill if it loads it up with provisions the Senate rejects. The Senate already passed a version of the bill without amendments Tuesday in a bipartisan 62-4 vote.

"If they expect that to pass and they load it up with spending issues, that's going to be a real problem," Gazelka said, noting Minnesota is facing a projected $2.4 billion budget deficit. "To add spending on top of that, it has to be an emergency," he said.

However, the House DFL appears to have some leverage. If the Legislature adjourns without a deal on the CARES Act, the decision falls to Walz to allocate the federal aid — and his choices may differ from Republican priorities.

The state originally planned to distribute $667 million of the nearly $1.9 billion it received from the federal government. But the U.S. Treasury changed the calculation for how much should go to local governments, boosting Minnesota's share to $841 million.

The Treasury guidelines are not hard rules, so Walz could opt to give out the lower amount and keep more of the federal aid for the state to use. Or he could go with his original plan to set aside a portion of the aid to respond toCOVID-19 hot spots that might pop up later. A Legislative Advisory Commission would review his decisions but couldn't block them.

Walz aides did not respond to questions Thursday about how he might distribute the money, but Revenue Commissioner Cynthia Bauerly said in a statement that the administration expects the Legislature to pass the CARES Act bill with the DFL amendments.

Marquart hopes the House and Senate pass his version of the bill Friday. He said the amendments address Minnesotans hard-hit by the pandemic, including child-care providers and veterans. "It's funding that's helping our communities, and I think it's a bill that's going to make our communities stronger, healthier and safer," he said.

County leaders as a group have taken no position on the new DFL spending but remain concerned that the Legislature's deal could now fall apart.

Said Association of Minnesota Counties lobbyist Matt Hilgart: "The CARES Act funding represents so much critical assistance that has already been delayed to our counties, to our cities ... that risking getting that out is just unfathomable to our members."

Jessie Van Berkel • 651-925-5044