The federal CARES Act sent $2.4 billion to the state of Indiana to be used for pandemic-related expenses. This was Indiana’s share of the general relief money to help states deal with the ramifications of the COVID outbreak. The Act included numerous other allocations designated to supplement specific state services.

That money is being funneled directly to the corresponding state agencies. The state was left to distribute the $2.4 billion as it deemed appropriate, but with a few major conditions: (1) it can only go to what expenses directly related to COVID-19, (2) it cannot be used as revenue replacement and (3) the money must be for goods or services provided before the end of the year.

These factors constrain the administration. They (administration officials) are still holding out hope for some greater flexibility on how the money can be spent. That is a big part of the reason, to date, they have only spent about half of the $2.4 billion. Of note, some $300 million was earmarked to go to local governments under an application/grant process, but much of it has not been approved because it doesn’t meet the federal conditions.

Budget officials across the country are actively engaged in encouraging the passage of Phase 4 relief legislation that includes more flexibility on how and when the relief money can be used. From the states’ standpoint, they do not want to spend state money on things that the feds end up authorizing as legitimate COVID-related expenses. So, while time is running short, there remains some justification for waiting at least a little longer before spending the balance of the $2.4 billion.

The U.S. Treasury Department is pursuing actions to officially interpret the permissible uses more broadly. And the prospect of legislation granting more flexibility, more time and/or new money remains very real as well. The current bottom line: The spending rules could change in the coming weeks.

Yes, the money must be used. Yes, tough decisions will have to be made soon. But past demonstration of fiscal responsibility suggests that even if the prospects for more flexibility do not pan out, the administration will not leave the money on the table; they will find authorized, effective ways to apply the money.

That confidence aside, it is nonetheless fair to ask, where will it go? As they continue to stay flexible themselves, look at all the potentials and weigh the options, they will soon have to make the call and answer this question.

One option the Indiana Chamber fully supports and is encouraging the state to take is using CARES dollars for unemployment claims – either through paying the actual obligations to employees or repaying the forthcoming loan from the federal government to replenish the state trust fund (see Mike Ripley’s story about that in tomorrow’s blog post).

Bill Waltz is vice president of taxation & public finance for the Indiana Chamber. He is also an attorney and has been with the organization for nearly 15 years.