Update as of April 8: Read the U.S. Treasury Department’s statement on federal tax code conformity.
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. Currently, the U.S. Department of Treasury is working through guidance and FAQs on the fund. We’ve provided some context, below, of what we do know so far.
Has 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.
How Much Funding? Who Gets What?
The implementation team will likely be publishing final numbers of “who gets what” shortly. The funding to states will likely be delivered in two tranches spread 12 months apart. Each state and the District of Columbia will receive an equal share of $25.5 billion. The remainder of the funding (after provisions making D.C. whole and money for locals and tribes are separated) will be distributed based on each state’s proportional share of unemployed persons. Each state, however, will receive a minimum of $1.25 billion.
Allocation Estimates: Recipient allocation projections available here. (Via downloadable spreadsheet. Estimates under the Senate regime from 3/8/21). This document is an estimate from Congressional offices prior to enactment. Please note that Treasury is tasked with and will be determining final allocations.
What Do States Need to Be Doing Now? Timing?
States should be working to make plans for the proceeds today, including how distribution to non-entitlement (<50k in population) local communities. The statute does not specifically dictate an exact date by which Treasury must distribute the funds to states. It does, however, provide more strict guidelines on timing for other recipients. The statute also specifies that “to the extent practicable… the Secretary shall make the payment required for the State or territory not later than 60 days after the date on which the certification required under subsection (d)(1) is provided to the Secretary.” We are waiting for clarity on timing and details on the certification process.
How Can the Money Be Invested / Managed?
We are waiting on clarity on how proceeds may be invested and managed. We have requested that the guidance around proceed management be consistent with (and no more restrictive than) the guidance similarly provided for the Coronavirus Relief Fund (CRF).
What Will the Reporting Requirements Look Like?
We are awaiting clarity on reporting requirements.
What Can the Money Be Spent On?
We anticipate that Treasury will produce documents further outlining the eligible uses of proceeds. The statute, however, provides that qualifying expenses include:
- 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.
- 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.
- 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;
- To make necessary investments in water, sewer, or broadband infrastructure.
And that funds may NOT be used:
- 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.
- 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 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.
Nonentitlement units 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 nonentitlement populations. States will have 30 days after the date of receiving the funding to pass it onto recipient nonentitlement communities. No nonentitlement 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.
Counties will receive $65.1 billion directly from Treasury generally based off of the county’s proportional population with some exceptions and rules.
Treasury has 60 days post enactment of ARPA to distribute the local funding.