The COVID-19 public health crisis and resulting economic crisis have put state and local governments under unprecedented strain. The American Rescue Plan provides $350 billion in emergency funding to eligible state, local, territorial and Tribal governments to respond to the COVID-19 emergency and bring back jobs.
State and local governments across America have been under a tremendous strain in the wake of the COVID-19 crisis, and while the need for services has increased, state and local revenues have plummeted as a result of the economic fallout from the crisis.
Who Will Receive Funding
According to specific guidance released by the U.S. Department of Treasury on May 10, 2021, the State and Local COVID Fiscal Recovery Fund will be made available as follows:
The state funding portion is approximately $195 billion, with $25.5 billion distributed equally among the 50 states and the District of Columbia, and the remaining amount distributed according to a formula based on unemployment. You can read more on allowable uses and limitations from the National Association of State Auditors, Comptrollers, and Treasurers ARP Analysis.
The bill includes $65.1 billion in direct, flexible aid to every county in America, as well as other crucial investments in local communities, including $1.5 billion over two years for public lands counties. Specific county-level estimates can be found through the National Association of Counties interactive search table.
The bill includes approximately $45.57 billion in funding that is available directly to metropolitan cities with a population of 50,000 and $19.53 billion will be administered to cities, towns, and villages with populations fewer than 50,000 (These funds will be directed to each state for further redistribution based on a per-capita formula established by the U.S. Treasury within 30 days). More information can be found at the National League of Cities
When & How Funding Should Be Used
Localities will receive the funds in two tranches – the first, after the U.S. Treasury certifies the proceeds to each jurisdiction and the second, one year later. Funding must be spent by the end of calendar year 2024.
States and local governments will enjoy significant flexibility to allocate funds for the following “eligible uses”:
- Supporting public health expenditures, by providing resources for COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health staff
- Addressing negative economic impacts caused by the COVID-19 crisis, including economic harms to workers, households, small businesses, impacted industries, and the public sector
- Investing in water, sewer, and broadband infrastructure to improve access to clean drinking water and to expand access to broadband internet.
- Replacing lost public sector revenue to secure government services despite the reduction in public revenue experienced due to the pandemic
- Providing premium pay for essential workers, such as public health and safety staff
Considerations for ARPA Expenditures
ARPA funds are non-recurring and should be applied primarily to non-recurring expenditures.
- Care should be taken to avoid creating new programs or add-ons to existing programs that require an ongoing financial commitment.
- Replenishing reserves used to offset revenue declines during the pandemic should be given high priority to rebuild financial flexibility/stability and restore fiscal resiliency.
- Use of ARPA funds to cover operating deficits caused by COVID-19 should be considered temporary and additional budget restraint may be necessary to achieve/maintain structural balance in future budgets.
- Investment in critical infrastructure is a particularly well-suited use of ARPA funds because it is a non-recurring expenditure that can be targeted to strategically important long- term assets that provide benefits over many years. However, care should be taken to assess any on-going operating costs that may be associated with the project.
Now is the time to collaborate, listen to your citizens, think about the future, and make investments that will create a sustainable future. Avenu is committed to providing a customized approach to helping governments manage ARPA funding and determining an investment strategy. Contact us today!