This Act may be cited as the “Special Districts Provide Essential Services Act”.

(a) In general.—Section 601(a) of the Social Security Act (42 U.S.C. 801(a)) is amended by adding at the end the following new paragraph:

“(3) FUNDS FOR SPECIAL DISTRICTS.—If an amount in excess of $150,000,000,000 is appropriated for payments made under this section, special districts shall be eligible for payments from the portion of such excess amount paid to States in accordance with subsection (c)(6).”.

(b) Amount for special districts.—Section 601(c) of the Social Security Act (42 U.S.C. 801(c)) is amended—

(1) by redesignating paragraphs (6) through (8) as paragraphs (8) through (10), respectively; and

(2) by inserting after paragraph (5) the following new paragraphs:

“(6) SPECIAL DISTRICTS.—

“(A) IN GENERAL.—If a portion of any excess amount described in subsection (a)(3) is paid to a State, the State shall allocate at least 5 percent of such portion for distributing payments to special districts in the State that submit to the Governor of the State or the entity designated by the Governor to distribute such payments (referred to in this paragraph as the ‘designated payment entity’) a request for a payment during the COVID–19 emergency and information described in subparagraph (B) demonstrating the need for the payment, which the Governor of the State or the designated payment entity has determined, on the basis of a good faith effort, is accurate.

“(B) INFORMATION DESCRIBED.—Information described in this subparagraph is written documentation demonstrating with respect to a comparable period before the COVID–19 emergency that the special district has experienced or is likely to experience during the COVID–19 emergency—

“(i) reduced revenue or operational funding derived from provided services, taxes, fees, or other sources of revenue;

“(ii) reduced indirect funding from the Federal Government, the State, or a unit of general government below the State level; or

“(iii) as a result of the COVID–19 emergency, increased expenditures necessary to continue operations.

“(C) AMOUNT OF PAYMENT.—

“(i) IN GENERAL.—Subject to clauses (ii) and (iii), the amount of the payment for a special district shall be determined by the Governor or the State or the designated payment entity, taking into consideration the extent of a projected budget shortfall for the special district during the COVID–19 emergency and the need of the special district to supplement projected revenue.

“(ii) LIMITATION.—Except as provided in clause (iii), the amount paid to a special district shall not exceed the amount of expenditures made by the special district for any quarter of calendar year 2019.

“(iii) EXCEPTION FOR PROVIDERS OF ESSENTIAL CRITICAL INFRASTRUCTURE SECTOR SERVICES.—If a special district provides essential critical infrastructure sector services (as defined by the Cybersecurity and Infrastructure Security Agency of the Department of Homeland Security), the amount paid to the special district may exceed the limit applicable under clause (ii).

“(iv) RULE OF CONSTRUCTION.—Nothing in the preceding clauses of this subparagraph shall be construed as requiring payment of an amount sufficient to provide a special district with full operational funding during the COVID–19 emergency.

“(D) RESPONSIBLE AUTHORITY FOR RECOUPMENT.—If it is determined that a payment made to a special district did not comply with the requirements of the preceding subparagraphs, or was otherwise fraudulent or improper, the special district shall be liable for the debt owed to the Federal Government under subsection (f), unless all or a part of the basis for such determination is that the determination required under subparagraph (A) regarding the accuracy of the information demonstrating the need for the payment was not made in good faith, in which case the State shall be liable for all or a part of such debt, as the Secretary determines appropriate.

“(E) DEADLINE FOR DISTRIBUTION OF FUNDS.—Payments to special districts in a State shall be distributed not later than 60 days after the State receives a payment from any excess amount described in subsection (a)(3).

“(F) COVID–19 EMERGENCY.—For purposes of this paragraph, the term ‘COVID–19 emergency’ means the public health emergency declared by the Secretary of Health and Human Services pursuant to section 319 of the Public Health Service Act on January 31, 2020, entitled ‘Determination that a Public Health Emergency Exists Nationwide as the Result of the 2019 Novel Coronavirus’ and includes any renewal of such declaration pursuant to such section 319.

“(7) EXCESS FUNDS WAIVER.—

“(A) IN GENERAL.—If a State has allocated funds from a payment to the State described in paragraph (6) to special districts in that State, but has not met the 5 percent allocation requirement of that paragraph, the Governor of the State may submit to the Secretary, in writing, a request for an excess funds waiver to exempt the State from having to make additional allocations from such funds to make up the remainder of such 5 percent requirement, and to allow the State to use the funds remaining in accordance with this section.

“(B) REQUIREMENTS.—A waiver request submitted under subparagraph (A) shall provide—

“(i) information regarding how funds from the payment to the State described in paragraph (6) were allocated to special districts in the State and otherwise used; and

“(ii) an explanation why the requirement for the State to meet the 5 percent allocation requirement of paragraph (6) should be waived.

“(C) DEADLINES.—

“(i) WAIVER REQUEST.—A request for an excess funds waiver shall be submitted to the Secretary not later than 60 days after the State receives a payment described in paragraph (6).

“(ii) APPROVAL OR DISAPPROVAL.—The Secretary shall approve or disapprove a waiver request submitted under subparagraph (A), in writing, not later than 14 days after the Secretary receives the request.”.

(c) Definition of special district.—Section 601(g) of the Social Security Act (42 U.S.C. 801(g)) is amended—

(1) by redesignating paragraphs (4) through (5) as paragraphs (5) through (6), respectively; and

(2) by inserting after paragraph (3) the following new paragraph:

“(4) SPECIAL DISTRICT.—The term ‘special district’ means a political subdivision of a State, formed pursuant to general law or special act of the State, for the purpose of performing one or more governmental or proprietary functions.”.

(d) Treasury IG oversight authority.—Section 601(f)(2) of such Act (42 U.S.C. 801(f)(2)) is amended—

(1) by inserting “or that a special district or State has not complied with the requirements of paragraph (6) or (7) of subsection (c) (as applicable),” after “subsection (d),”; and

(2) by striking “such subsection” and inserting “subsection (d) or paragraph (6) or (7) of subsection (c) (as applicable)”.

(e) Update to guidance.—The Secretary of the Treasury shall update any guidance issued with respect to the Coronavirus Relief Fund established under section 601 of the Social Security Act (42 U.S.C. 801) to reflect the inclusion of special districts as eligible for payments from amounts appropriated under such section, to the extent such amounts exceed $150,000,000,000.

The Board of Governors of the Federal Reserve System shall include special districts, as defined in section 601(g)(4) of the Social Security Act (42 U.S.C. 801(g)(4)) (as added by section 2(c)), as eligible issuers in the Municipal Liquidity Facility program authorized under section 13(3) of the Federal Reserve Act (12 U.S.C. 343(3)).