Legislative Update – Week 11

Federal Legislation Would Pump Billions into Vermont 

On Wednesday, the U.S. Senate finalized and passed its third COVID-19 relief package S. 3548 The Coronavirus Aid, Relief, and Economic Security (CARES) Act. While we are all digesting the unprecedented 880-page, $2 trillion package, one thing is clear – it will go a long way to helping states recover from this unprecedented crisis. While the bill still needs to pass the House,  the comprehensive aid package includes direct payments to Americans of up to $1,200 by April 6th, a dramatic expansion of unemployment insurance, and billions of dollars to state governments as well as small business assistance. 

We will be holding a webinar with the offices of Senators Leahy and Sanders and Congressman Welch to learn more about the federal relief package on Monday, March 30 at 2:00 pm. Register here.

Big items in the bill: 

Paycheck Protection Program – $350 billion in funding

The PPP would provide small businesses and other entities with zero-fee loans through the Small Business Administration (SBA) and the U.S. Department of Treasury of up to $10 million which can be used in coordination with other COVID-financing assistance established in the bill or any other existing SBA loan program. With these loans, principal and interest are deferred for up to a year and all borrower fees are waived and up to 8 weeks of average payroll and other costs will be forgiven if the business retains its employees and their salary levels. 

Emergency Economic Injury Grants –  $562 million for loans, $10 billion for grants

These SBA Economic Injury Disaster Loans (EIDL) may be used to pay for expenses that could have been met had the disaster not occurred, including payroll and other operating expenses. Better still, these EIDLs provide an advance of $10,000 to small businesses and nonprofits that administered within three days of applying for the loan. The EIDL grant does not need to be repaid, even if the grantee is subsequently denied an EIDL. The loans of up to $2 million that carry interest rates up to 3.75 percent for companies and up to 2.75 percent for nonprofits, as well as principal and interest deferment for up to 4 years. 

Debt Relief for Existing and New SBA Borrowers –  $17 billion in funding

Under this provision, SBA will cover all loan payments, including principal, interest, and fees, for existing SBA borrowers with standard SBA 7(a), 504, or microloans for six months. This relief will also be available to new borrowers who take out an SBA loan within six months after the President signs the bill.

Payroll Tax Credit For Employers

Employers who hold onto employees during the pandemic would be eligible for a refundable payroll tax credit of 50% credit that would offset the employer’s share of Social Security taxes up to $10,000 of qualified wages per employee. For eligible employers with fewer than 100 full-time employees, all employee wages qualify for the credit. For employers with more than 100 full-time employees, qualified wages are wages paid when they are not providing services due to COVID-19.

Student Loan Tax Credit

To alleviate the pressure of student loan costs during this crisis, tax relief encouraging employers to implement student loan repayment programs very similar to what LCRCC has been lobbying for was included. This provision will exclude up to $5,250 in qualifying student loan repayments paid by the employer on behalf of the employee from income for income tax purposes.

As we said, this bill is unprecedented and 880-pages, so we know there is more in this. We will continue to summarize this as details are confirmed. 

What does it mean for the state coffers?

In total, Vermont is expected to receive around $2 billion as a result of this act. Included in that number is our portion of the $150 billion stabilization fund the act created, about $1.25 billion within the next 30-days to be applied to expenses between March 1st and the end of the year. This funding flexibility is still being understood as it is directed to “necessary expenditures incurred due to COVID-19.” While it is still unclear exactly how much of the education stabilization fund Vermont will be allocated, initial estimates are close to an additional $25-28 million for higher education and $26-27 million for elementary and secondary education. 

Much of the other assistance is funneled through pre-existing programs and will not require legislative action at the state level – of this pot of money, Vermont is expected to receive;

• $5.4 million to support public health preparedness and response activities through the Centers for Disease Control;
• $4.7 million in Community Development Block Grant (CDBG) funding to support the expansion of community health facilities, child care centers, food banks, and senior services;
• $5 million in Community Service Block Grants to address the consequences of increasing unemployed and economic disruption;
• $4.3 million in Child Care Development Block Grants to support child care assistance to health care sector employees, emergency responders, sanitation workers, and other works deemed essential during the coronavirus response;
• $4.6 million for housing assistance grants through the Department of Housing and Urban Development;
• $4.1 million in the Low Income Home Energy Assistance Program (LIHEAP);
• $20 million to support public transportation emergency relief;
• $9.6 million to support the state’s airports;
• $3 million in election assistance grants;
• $2 million to support state and local law enforcement and corrections through the Byrne-Justice Assistance Grant (JAG) program;
• $826,000 through the National Endowment for the Arts and the National Endowment for the Humanities to support museums, libraries, and other organizations that have been forced to shut their doors due to the virus;
• $175,000 to support small- and medium-sized manufacturers recover from the economic impacts of COVID-19 through the Manufacturing Extension Partnership program; and
• $862,000 in Emergency Preparedness Grants through the Federal Emergency Management Administration (FEMA).

A user-friendly overview of the bill by the National Council of State Legislators can be found here.

Businesses looking to apply for SBA loans should visit SBA.gov. Information on these new loans will be available there as soon as possible.