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Looming deadline for CARES Act money sparks debate between Northam and General Assembly

Gov. Ralph Northam speaks at a press conference in August. (Ned Oliver/Virginia Mercury)

How Virginia spends remaining coronavirus relief funds provided through the federal CARES Act has become a point of contention between Gov. Ralph Northam and the General Assembly — now in the final stretch of finalizing a two-year budget plan amid a special session that’s lasted for nearly two months.

Looming in the minds of many legislators is a Dec. 30 deadline set out in the federal stimulus bill — the date by which states are expected to spend the money they received. For months, state governments, including Virginia’s, held out hope that Congress might pass another aid package that would extend the deadline or give them more flexibility in how to spend the money, which can’t be used to cover revenue losses.

Those hopes were largely quashed Tuesday with a series of tweets from President Donald Trump, announcing he was putting a stop to negotiations until after the November election. Trump later called on Congress to pass relief for airlines and small businesses, among other stimulus funds, but the erratic messaging from the White House sealed the sense, for many lawmakers, that additional federal aid won’t be coming anytime soon.

“That Dec. 30 deadline is really solid now that Trump’s pulled out of the talks,” said Del. Mark Sickles, D-Fairfax, a member of the Virginia House Appropriations committee. “So, making sure that all these relief funds can be used for useful, legitimate purposes is really key.”

But right now, there’s disagreement between the governor, who can veto or request amendments to the final budget agreement, and General Assembly lawmakers over how remaining CARES Act funding should be allocated. At the beginning of the special session, the administration had left a little more than $1 billion of federal funding unallotted — a point of frustration both for many legislators and people across Virginia who are struggling amid the ongoing COVID-19 pandemic, Sickles said.

On Wednesday and Thursday, as House and Senate conferees continued budget negotiations, the Northam administration made a flurry of new announcements on CARES Act spending, including $220 million on K-12 education, $30 million to fast-track broadband projects and $12 million in additional funding for a rent and mortgage relief program first announced in June. 

Despite the spending announcements, Virginia still has about $700 million in remaining federal funding and, as of Thursday, 84 days left to find a use for it. It’s money that both the House and Senate budgets propose spending on specific line items, such as unemployment insurance and a utility debt forgiveness fund in the House spending plan — which would leave a little more than $110 million unallocated — and support for tourism and recreation industries in the Senate’s.

But in a Wednesday letter to General Assembly leaders and the chairs of both budget committees, Northam indicated he might not sign off on a spending plan that left the administration less flexibility to administer the money.

“An emergency response needs less bureaucracy, not more,” he wrote. “As an Army veteran, I know that wars fought by committee are losing battles.”

Virginia Finance Secretary Aubrey Layne said there’s several reasons why the administration wants to avoid what he described as “authorizing” the remaining federal funding for specific purchases or programs. One is that while the CARES Act only covers COVID-specific expenses incurred from March to December, he said the federal government gives states an extra month to spend the money on any costs that arise from their response to the pandemic.

“The expenditures have to be incurred by Dec. 30,” Layne added. “But you can pay for them up to 30 days after that. So, we know right now that agencies are incurring additional costs related to COVID-19, but we don’t have to pay for those now because they can be reimbursed after the deadline when we know the actual amounts.”

Beyond that, Layne said the pandemic is a “fluid situation” that could still require a wide degree of adaptability in spending. He gave the example of the state’s unemployment trust fund, which would have run out of money next week without a loan from the federal Department of Labor, or any future COVID-19 vaccine, which will require statewide coordination and mass immunization efforts.

“Let’s say we go out there, and — like the House has done — say we’re going to spend every nickel,” he added. “Well, what if something pops up in the next 20 days and we’ve already said we’re going to spend that money? Then what do we do?”

House appropriations staff said the proposed spending in their budget plan aligns with many of the governor’s already stated priorities, including $210 million in CARES Act money that committee members dedicated to unemployment assistance (the Senate version gives the governor more leeway to deposit any remaining federal relief back into the trust fund). 

If any of the earmarked money isn’t spent by a certain date, staff said the governor would also have the ability to direct it toward another purpose. But part of the specificity — at least in the House budget — was based on wider dissatisfaction over what some legislators viewed as the administration’s conservative approach to CARES Act funding for much of the pandemic.

“It has been frustrating to people all over Virginia, not just legislators,” Sickles said. And in some cases, that cautious approach to spending has appeared to hurt relief efforts. One example, cited by both legislators and advocates, was the governor’s $50 million rent and mortgage relief program first announced at the end of June.

From the beginning, advocates pointed out that the CARES money directed to the program was a fraction of the $200 million requested by the Virginia Department of Housing and Community Development. It was also pulled together in the three weeks that the Supreme Court of Virginia agreed to a temporary statewide moratorium on evictions — the only period in Virginia where landlords were explicitly banned from even filing eviction cases, said Christie Marra, the director of housing advocacy for the Virginia Poverty Law Center.

Since then, the U.S. Centers for Disease Control and Prevention announced a federal eviction moratorium through the end of the year. But there’s no guarantee whether it will extended, and Marra said it’s been interpreted to stop final eviction proceedings but not from preventing landlords from signaling their intent to remove tenants from their homes. 

Despite the limited initial funding, the program, administered by DHCD and local housing nonprofits, had only distributed $10.4 million by Sept. 23 — rent and mortgage payments that helped 4,754 households across Virginia, according to agency spokeswoman Amanda Love. Landlord groups and tenant advocates said the slow rollout could be traced to a slew of inefficiencies within the program itself. 

For landlords, one primary issue was that it initially required them to forgive half of the total rent due or forgive a portion of the back rent and set up a payment plan for the rest. “That was one major barrier, because why would you do that?” said Patrick McCloud, CEO of the Virginia Apartment Management Association.

While landlords were reluctant to accept the funding, another issue was that the program initially only allowed tenants to apply for relief, Marra said — a lengthy process that requires proof of income and other documentation. There’s also been confusion and delays across the board. Marra said that local nonprofits were given an initial sum of money for relief payments and could request more once they spent it. But one pro bono attorney working with the program told Marra that her local agency didn’t know they could request more funding from the program.

“We’re still hearing stories about residents who apply and experience very long delays,” McCloud added. Marra said another attorney recently followed up with the program on behalf of a client who applied in early September and learned administrators had just started processing applications from the beginning of July.

“The fact that there’s this long wait time tells you how flooded they’ve been with requests,” she added. The administration has made several changes to the program since it debuted, including removing the requirement that landlords forgive back rent and — in late September — expanding it so that landlords can apply for assistance on behalf of tenants. 

Local agencies that administer the program said those changes have noticeably increased both the number of households approved and the amount of rent relief they’re getting. Kyle Sensabaugh, director of housing services at People Inc., which administers the program in 17 cities and counties in Southwest Virginia, said that under the initial rules, it would sometimes take multiple phone calls over the course of more than a week to work out a payment plan that a landlord was willing to sign.

He credited DHCD for streamlining the program and says he expects to have distributed $1 million by the end of next week, noting especially high demand from factory workers whose hours have been reduced and people unable to work because they have no child care options.

“In the beginning it was a little slower, there were more phone calls,” Sensabaugh said. “Now it’s more seamless. I think it’s flowing.”

Data on the latest number of grants won’t be available until next week, according to DHCD. But Marra said a larger upfront commitment of CARES Act funding to the program would have been a better strategy to get money out the door faster by allowing the agency to expand its administrative operations. 

“The relatively small amount of money distributed isn’t because there isn’t a great demand — it’s because I think there’s a greater demand than anyone anticipated,” she said. But because the program was slow to launch, legislators and the Northam administration are backing away from devoting more time-limited funding. 

Sickles said the administration initially proposed spending another $150 million in CARES Act money on rent and mortgage relief — a suggestion Layne said that state leaders later backed away from given the impending Dec. 30 deadline.

“There was no way that another $150 million could be spent on the program,” Sickles added. The governor’s latest $12 million allotment was “based on DHCD estimated need through the remainder of the COVID relief spend deadline,” Love added in a Wednesday email. The initial $50 million investment has already been distributed to local nonprofits, and Marra said it’s unlikely that the additional spending will be enough to fully address the requests for rent and mortgage assistance that come in by the agency’s current Nov. 15 deadline.

Like other advocates, she said it’s especially concerning to see leaders pull away from the program just as the funding process was becoming more efficient. Language in the House and Senate budgets would also require landlords to notify tenants of the state funding before they started eviction proceedings, which could drive up demand even further, Marra added.

“The governor has made this a priority issue and is working to advocate for an additional $2.4 billion for Virginia in federal rent assistance and $612 million in mortgage assistance in the form of block grants for COVID-19,” Love responded. But tenant groups say they’re frustrated with both the administration and the legislature for not dedicating more money to struggling tenants and homeowners.

“The last thing we want legislators to do is walk away and punt this forward because of so-called budget concerns,” said Luis Aguilar, the Virginia state director of CASA, a nonprofit that advocates for Latinos and immigrants. “The reality is that people are going to get evicted.”

This post has been updated to include additional comments from local program administrators.

Staff writer Ned Oliver contributed to this report.