Is Our Share of CARES Act Money Disappearing?
By Tom Yamachika, President Two weeks ago in this space, we wrote about a generous genie known as Uncle Sam who is making available $1.25 billion under section 5001 of the CARES Act. The catch is that the money can be used only to cover costs that (1) are necessary expenditures incurred due to COVID–19; (2) were not accounted for in the government’s budget when the CARES Act became law; and (3) were incurred between March 1 and December 30, 2020. We wondered out loud if several categories of moneys appropriated in the State’s recently passed budget bill, SB 126 (significant parts of which were line-item vetoed by the Governor) would be eligible for section 5001 federal money. Buried on the U.S. Treasury’s website is a document that provides several answers. We certainly hope our lawmakers and government officials know about it – because having to forgo, or pay back, a bunch of that money is not going to be a happy thing. For example, Treasury says that we can spend our allotted dollars for actions taken to respond to the public health emergency, such as by addressing medical or public health needs, or by responding to the emergency’s effects, such as by providing economic support to those suffering from employment or business interruptions due to COVID-19-related business closures. They say that these funds may not be used to fill shortfalls in government revenue to cover expenditures that would not otherwise qualify under the law. Treasury also says that for a cost to be incurred, the goods and services the money is spent on would need to be performed or delivered by December 30 (with payment up to 90 days later). Put another way, although our state government usually considers a cost to be drawn against the budget for the year the money was contractually obligated, or “encumbered,” it is not sufficient if the money is encumbered before December 30. The delivery or performance called for by the contract must occur before December 30. It is okay if durable goods that are necessary to deal with COVID-19 are delivered before the end of the year even if those goods are not used before the year is out. Some examples of costs that won’t be reimbursed are: (1) expenses for the State share of Medicaid; (2) damages covered by insurance; (3) payroll or benefits expenses for employees whose work duties are not substantially dedicated to mitigating or responding to the COVID-19 public health emergency; (4) expenses that have been or will be reimbursed under any federal program, such as reimbursement of contributions by States to State unemployment funds; (5) reimbursement to donors for donated items or services; (6) workforce bonuses other than hazard pay or overtime; (7) severance pay; and (8) legal settlements. After all that, do we have a better idea of what cost items to avoid? Then, lawmakers, it’s time to come together and figure out how to use the genie’s largesse to do the most good. Let’s not make the mistake of leaving tons of money in limbo land – or in some special fund, which would have the same effect on these dollars.
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How We're Going To Spend CARES Act Money
By Tom Yamachika, President Imagine what would happen if a genie came up to you and said, “Here’s a pot of money for you. All you need to do is spend it by the end of the year. If you don’t, whatever you haven’t spent will disappear.” What would you do with it? Our State government just got that genie visit. The genie is called Uncle Sam, and the pot of money contained $1.25 billion. Our recently passed budget bill, SB 126, parceled it out – or tried to. The largest chunk of the money, around $560 million, was given to county governments. Honolulu received about $387 million, the Big Island $80 million, Maui $67 million, and Kauai $29 million. Then, the Legislature called for $230 million to be spent on a State enhancement, or “plus-up,”to the weekly benefit to those now on unemployment. The federal government’s extra $600 per week ran out at the end of July, and, as of press time, no deal was in place to extend the benefit. The idea was for the State to kick in $100 per week from August 1 to December 31, but that won’t happen because Gov. Ige has line-item vetoed this appropriation. According to the Governor’s office, he prefers to wait until the federal government reaches a deal on what to do on their end. This reasoning, if true, would be strange because there is already a provision in the appropriation saying that the $100 per week isn’t payable if the federal government is kicking in more than $300 per week. In the meantime, the unemployed need to survive without any plus-up at all. The bill appropriated $100 million to assist childcare, elderly care facilities, hospitals, small businesses, nonprofits, and schools in buying personal protective equipment. The Hawaii Emergency Management Agency (HIEMA) is supposed to be on top of this program. The Governor chopped the $100 million to $61 million. The bill also appropriated $100 million for a housing relief and resiliency program, administered through HHFDC. There, the idea is to give assistance – 50% of rent payable up to $500 per month from August 1 to December 31 – to renters and homeowners impacted by COVID-19 and whose income level doesn’t exceed 100% of Area Median Income (which is about $101,600 for a family of four here). The Governor slashed the $100 million to $50 million. The bill directed $90 million to the airports, specifically to augment airport screening and health assurance security initiatives. On the Department of Transportation’s wish list is a thermal screening system, a Web-based traveler verification application, traveler verification rooms (sounds like interrogation rooms), a swab and testing facility, and a service contract for testing. The Governor reduced the appropriation to $70 million. There are many other appropriations of lesser amounts. Some of them were reduced. And, of course, there is a “slush fund” category. $40 million is appropriated to the Governor’s office, supposedly to take care of any unanticipated needs. That appropriation wasn’t reduced. Finally, there is a catch-all clause. Any money appropriated but unspent as of December 28 is sent to the Unemployment Insurance trust fund, and hopefully that money will help soften the automatic increases in the unemployment taxes that otherwise are triggered at the end of the year, as we recently wrote about. But a big question remains: Are moneys dumped into the trust fund “necessary expenditures incurred” before the end of the year, within the meaning of section 5001 of the CARES Act? If we can’t answer this question with a definitive “Yes,” we had better get some clarity from the federal government pronto, or risk having to pay that money back to the genie. And the $366 million that was line-item vetoed is unappropriated money that won’t even be going to the trust fund. Those dollars will be disappearing unless we do something about it ASAP. We don’t get a genie visit that often, so we had better make the best of it when it does happen. Electric Vehicle Sweeteners Running Out?
By Tom Yamachika, President If you are one of the lucky people who have managed to buy an electric vehicle and get a special plate for it, you probably know that several benefits came with that special plate, including the ability to park at government parking lots (including at the airport!) and street spaces for free, and the ability to jump into carpool lanes even though there is just one person in the car. You also might have gotten a federal tax credit for your car purchase. Sadly, good things don’t last forever. The free parking benefit and the carpool lane benefit expired on June 30, 2020, according to the terms of the 2012 law that spawned them. For tax benefits, the pendulum has started swinging in the other direction as well. The federal credit is up to $7,500 per qualified vehicle, depending on battery size. But a phase-out clock starts ticking on the federal credit given for a car manufacturer once the manufacturer has sold 200,000 units. Tesla was the first to hit the milestone, followed by GM, both in the second half of 2018. As a result, electric vehicle credits are no longer available for new purchases from these manufacturers…but there are plenty of other manufacturers. Here is a list of qualifying vehicles from the IRS. From the State of Hawaii, electric vehicle owners now can expect a $50 surcharge on their annual vehicle registration fees, thanks to a 2019 law that went into effect on January 1, 2020. More is yet to come; the Department of Transportation has been pursuing the idea of funding improvements to highways and bridges with a Road Usage Charge, now called HiRUC, that will charge citizens per mile driven instead of (well, we think it’s instead of, but our lawmakers may have other ideas) charging for fuel purchases through our current fuel tax. Owners of hybrids, electric vehicles, and alternative fuel vehicles can expect to pay quite a bit more under HiRUC than they are now paying under the fuel tax system. We have written about it in more detail here. Electric vehicles also benefit from laws such as HRS section 291-71 requiring places of public accommodation (shopping centers, for example) to dedicate some parking stalls for electric vehicle charging. These laws don’t seem to be going away any time soon. Instead, the momentum seems to be toward requiring more electric vehicle infrastructure such as chargers. The City & County of Honolulu, for example, recently adopted Ordinance 20-10 mandating that builders of new residential or commercial buildings follow new “electric vehicle readiness compliance pathways.” See section C406.8, Electric Vehicle Infrastructure, beginning on page 8 of the bill. (We had written about a previous incarnation of that bill as well.) For residential buildings, for example, if new construction or renovation adds eight or more new parking stalls, then at least 25% of the new stalls must be electric vehicle charger ready. If new construction or renovation of commercial buildings adds 12 or more new parking stalls, at least 25% of the newly added parking stalls must be electric vehicle charger ready. There are some exceptions and reductions in the requirements for cases such as retail establishments and affordable housing. Government benefits for electric vehicles, then, appear to be past their peak. Some of them are starting to erode. Those who are in the market for a new vehicle now and are banking on government benefits should definitely do their homework to see if the benefits they are counting on still exist or are on their way out. |
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