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Unpacking the CARES Act


Act provisions specific to the municipal market

By Tom Kozlik
Director, Head of Municipal Strategy and Credit
Public Finance
Hilltop Securities Inc.



On Wednesday, March 25, the Senate unanimously approved a $2+ trillion fiscal measure to provide relief to the U.S. economy, businesses, state and local governments, and Americans. The House is expected to approve the bill on Friday, March 27, and President Trump will sign it into law shortly thereafter.

The legislation is known as the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act. The Act is effectively the third phase of COVID-19 relief stimulus measures passed by the federal government. While the bill has not been passed and it’s various provisions are subject to change, House Speaker Nancy Pelosi predicted the house will have a strong bipartisan vote at a morning press conference on Thursday, March 26.1

Below, we summarize and review elements of the CARES Act specific to state and local governments, the municipal market, and housing. For a more comprehensive review of the bill, as well as its impact on the municipal market, read our latest municipal commentaries.

State and Local Government Stimulus
The CARES Act set up a $150 billion Coronavirus Relief Fund to make appropriated payments to states, tribal government, and units of local government. 2 As of now, it appears this amount comes with heavy use restriction. Governments can only use these payments on COVID-19 related activities. The following amounts have been earmarked for specific parties:

  • $3 billion for Washington D.C., Puerto Rico, Virgin Islands, Northern Mariana Islands, and American Samoa
  • $8 billion for Tribal governments
  • $1.25 billion, at minimum, for states (the final amount will be adjusted based on population)

Municipal Market Liquidity
The Act also promises $454 billion to the Federal Reserve. These funds would be used to purchase business, state, or municipal securities directly from issuers or in the secondary market .3 The aim, as indicated in the legislation, is to provide liquidity to the financial system that supports lending to states and municipalities. The Treasury Department has 10 days to set up the procedures to purchase securities.

Education Stabilization
The Act is also setting up a $30.9 billion Education Stabilization Fund. These funds will go to states, local school districts, and higher education institutions to help with immediate needs related to coronavirus, including supporting education technology, distance education, and making up for lost learning time.4

Federal Aviation Administration and Airport Support
The Act will also provide $10 billion to the Federal Aviation Administration’s Airport Improvement Program (AIP). These funds will be distributed by formula and help airports that have faced a drop in passengers maintain their operations. 4

Transit Infrastructure Grants
The Act provides $45 billion for Federal Transit Administration (FTA) Transit Infrastructure Grants. These funds will be distributed, using FTA formulas, to transit providers (including state and local governments) to assist with operating and capital expenses.4

Department of Housing and Urban Development
A little over $17 billion is being allocated from the CARES Act to the Department of Housing and Urban Development (HUD). These are some of the more sizeable housing and HUD allocations4:

  • $5 billion for Community Development Block Grants for COVID-19 related services
  • $4 billion for Homeless Assistance Grants for those who would be homeless due to coronavirus
  • $1.25 billion for Tenant-Based Rental Assistance - Section 8-related voucher assistance for select individuals who stand to lose income because of the coronavirus
  • $1 billion for Project-Based Rental Assistance - low-income assistance to help families and individuals from becoming at-risk for homelessness

There are other provisions that are going to impact housing, education, health care, and Medicaid. These provisions will undoubtedly affect state and local governments and other municipal entities directly or indirectly as well. However, the above seem to be the most significant for municipals. Despite the enormity of the CARES Act, it is possible that another relief, stimulus or spending package may be needed, and potentially at an accelerated pace.

For more information on the CARES Act’s provisions as well as the ongoing impact of COVID-19 on the municipal markets, read our latest municipal commentaries.


1 Pelosi Predicts ‘a Strong Bipartisan Vote’ on the Stimulus Plan. (March 26, 2020). The New York Times.
2 March 25, 2020, draft of CARES Act. Pg. 608.
3 March 25, 2020, draft of CARES Act. Pgs. 514-515.
4 $340 billion Surge in Emergency Funding to Combat Coronavirus Outbreak. (March 25, 2020). Senate Appropriations Committee.

The paper/commentary was prepared by Hilltop Securities (HTS) and Hilltop Securities Asset Management (HSAM). It is intended for informational purposes only and does not constitute legal or investment advice, nor is it an offer or a solicitation of an offer to buy or sell any investment or other specific product. Information provided in this paper was obtained from sources that are believed to be reliable; however, it is not guaranteed to be correct, complete, or current, and is not intended to imply or establish standards of care applicable to any attorney or advisor in any particular circumstances. The statements within constitute the views of HTS and/or HSAM as of the date of the document and may differ from the views of other divisions/departments of affiliate Hilltop Securities Inc. In addition, the views are subject to change without notice. This paper represents historical information only and is not an indication of future performance. Hilltop Securities Asset Management is an SEC-registered investment advisor. Hilltop Securities Inc. is a registered broker-dealer, registered investment adviser and municipal advisor firm that does not provide tax or legal advice. HTS and HSAM is a wholly owned subsidiary of Hilltop Holdings, Inc. (NYSE: HTH) located at 1201 Elm Street, Suite 3500, Dallas, Texas 75270, 214.859.1800. Member: NYSE/FINRA/SIPC.

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