A Network of the National Association of State Treasurers
Policy Update:

Coronavirus State and Local Fiscal Recovery Fund (CSLFRF)

Indiana State Capitol Building. Source: Daniel Schwen via Wikimedia Commons.
Brian Egan, Policy Director, NAST

Update as of June 17, 2021: U.S. Treasury Department releases updated FAQs.

UPDATE as of May 25, 2021: U.S. Treasury Department releases information on non-entitlement units (NEU) of local government.

About CSLFRF

The American Rescue Plan Act (ARPA), which signed into law on March 11, 2021, created the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF). Among various other sources of funding, the CSLFRF provides state, territorial, tribal and local governments with $350 billion in relatively flexible funding to address the numerous health and economic fallouts of the COVID-19 pandemic. The U.S. Department of Treasury continues to publish and update resources pertaining to the fund.

How Much Funding? Who Gets What?

The implementation team released allocation numbers on the CSLFRF landing page, including:

Some recipients will receive funding spread across two tranches while others will receive one lump sum. States that have experienced a net increase in the unemployment rate of more than 2 percentage points from February 2020 to the latest available data as of the date of certification will receive their full allocation of funds in a single payment; other states will receive funds in two equal tranches. Local governments will receive funds in two tranches, with 50% provided beginning in May 2021 and the balance delivered approximately 12 months later.

Each state and the District of Columbia will receive an equal share of $25.5 billion. The remainder of the funding (after provisions to make D.C. whole and money for locals and tribes are separated) has been allocated based on each state’s proportional share of the unemployed persons.

Did NAST Weighed In?

Yes, NAST joined our partners at the Government Finance Officers Association (GFOA), National Association of State Budget Officers (NASBO) and the National Association of State Auditors, Comptrollers and Treasurers (NASACT) in submitting a request letter outlining the areas of clarity most urgently needed by state and local finance officials.

Read the letter here.

NAST also weighed in on the need for specific guidance around cash management and investment of CSLFRF proceeds.

Read the letter here.

What Can the Money Be Spent On?

Treasury recently released an interim rule outlining specifics on the use of funds available here. The broad guardrails have been set by statute and include qualifying expenses:

  1. To respond to the public health emergency with respect to the Coronavirus Disease 2019 (COVID–19) or its negative economic impacts, including assistance to households, small businesses, and nonprofits, or aid to impacted industries such as tourism, travel, and hospitality.
  1. To respond to workers performing essential work during the COVID–19 public health emergency by providing premium pay (up to $13 an hour up to $25,000 for the a year) to eligible workers of the State, territory, or Tribal government that are performing such essential work, or by providing grants to eligible employers that have eligible workers who perform essential work. Eligible employees are defined as workers needed to maintain continuity of operations of essential critical infrastructure sectors and additional sectors as each Governor of a State or territory, or each Tribal government, may designate as critical to protect the health and well-being of the residents of their State, territory, or Tribal government.
  1. For the provision of government services to the extent of the reduction in revenue of such State, territory, or Tribal government due to the COVID–19 public health emergency relative to revenues collected in the most recent full fiscal year of the State, territory, or Tribal government prior to the emergency;
  1. To make necessary investments in water, sewer, or broadband infrastructure.

And that funds may NOT be used:

  1. To either directly or indirectly offset a reduction in the net tax revenue of such State or territory resulting from a change in law, regulation, or administrative interpretation during the covered period that reduces any tax (by providing for a reduction in a rate, a rebate, a deduction, a credit, or otherwise) or delays the imposition of any tax or tax increase.
  1. For deposit into any pension fund.

Other provisions include:

  • Recipient governments must provide periodic reports to the Treasury Department with a detailed accounting of the use of funds. States and territories must also provide any modifications to tax revenue sources. 
  • Funds can be recouped by the Treasury Department if the recipient does not comply with the eligible uses. 

How May the Funds be Managed?

So far, there is no authoritative guidance on how the funds may be managed, but many recipients are managing the proceeds in manners that our consistent with their typical investment policies. Updated FAQs released on May 27 further clarified (question 10.3) that interest earned on CSLFRF proceeds will NOT need to be remitted back to the U.S. Treasury, and fund payments are not subject to the requirement of the Cash Management Improvement Act and Treasury’s implementing regulations at 31 CFR part 205.

How Will Locals Get Funding?

Counties and “metropolitan cities” will work directly with the Treasury Department to receive funding. The statute indicates that metropolitan cities are those with populations over 50k. State governments. Metropolitan cities will receive $45.57 billion divided among recipients based on a modified Community Development Block Grant (CDBG) formula.

Non-entitlement units (NEUs) of local governments (those under 50k in population) will receive funding that is passed through the states. Treasury will provide $19.53 billion of such funding to states divided based on a state’s proportion of total non-entitlement populations. States will have 30 days after the date of receiving the funding to pass it onto recipient non-entitlement communities. No non-entitlement community may receive more than 75 percent of its most recent budget as of January 27, 2020. Provisions are included in the statute for recoupment of excess funds and extensions for pass through.

Treasury recently published a page providing additional details on the distribution of NEU funds.

Counties will receive $65.1 billion directly from Treasury generally based off of the county’s proportional population with some exceptions and rules.

Other Updates

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