It is no surprise that with the contracted economy in 2020 and 2021 that state and local revenues fell. In a September 2020 report, the Brookings Institution projected that state and local government revenues would decline by $155 billion in 2020 and $167 billion in 2021. A February 2021 report by The Pew Charitable Trust reported that state tax revenue was down $46.4 billion from pre-pandemic levels in the four quarters ending June 30, 2020 and that 15 states had to dip into their rainy day funds.
Despite falling revenues and massive layoff of educators and other public sector employees, state and local governments set up emergency medical facilities and vaccination sites to meet the needs of millions of Americans during an unprecedented public health crisis.
Filling the gap
To address the gap in revenue and shore up “on the ground” services, the American Rescue Plan Act of 2021 allocates $350 billion in emergency funding directly to each eligible state, county, city, territorial, and Tribal government and to non-entitlement units of local government. This $350 billion is in addition to the $150 billion state and local governments received from the CARES Act in March 2020. A breakdown of the $350 billion is below.
- States and the District of Columbia = $195.3 billion
- Counties = $65.1 billion
- Cities and other non-entitlement units of local government = $65.1 billion
- Tribal governments = $20 billion
- Territories = $4.5 billion
The Treasury Department provided guidance on the eligible use of the funding and released a range of resources such as detailed eligibility criteria and a portal to request funds, a fact sheet, FAQs (last updated July 19, 2021), an Interim Final Rule to help implement the provisions of the program, compliance and reporting guidance, and a summary of the process to finalize the Interim Final Rule.
Funds distributed to counties were based on the county’s share of the US population and counties that currently receive Community Development Block Grant (CDBG) funding will receive the larger of the population-based share or an amount determined by a modified CDBG allocation model.
Statutory eligible uses
As of July 2021, the Treasury Department lists the following as statutory eligible uses of SLFRF:
- Respond to or mitigate the public health emergency or its negative economic impacts including assistance to households, small businesses, nonprofits or aid to impacted industries
- Respond to workers performing essential work during the COVID-19 public health emergency by providing premium pay to eligible workers
- Provide government services to the extent of the reduction in revenue due to the COVID-19 public health emergency compared to the revenues collected in the most recent full fiscal year
- Make necessary investments in water, sewer or broadband infrastructure
What some cities and counties are doing
While some city and county governments are currently inviting public engagement and surveying their respective communities to get input on how local FRF should be utilized within the confines of statutory eligible uses, some localities have already used some of the funds. Below are several examples from across the country.
- Charleston County, South Carolina – Infrastructure improvements and repairs to county buildings, hybrid workforce standardization, and cybersecurity training.
- Deschutes County, Oregon – Supporting a Little Kits Early Learning and Childcare Center, a camp project, conversion of a motel into a year-round shelter, certain COVID-19 related costs, a local Ronald McDonald House, and support the construction of a Veterans Village project.
- Fulton County, Georgia – Home mortgage assistance for homeowners, assistance to small businesses with less than 30 employees, premium pay raise for all Fulton County employees, summer youth and young adult jobs, arts funding for programs and services, and Health Response, Operational Stability and Community Needs
- Pima County, Arizona – Expansion of shelter capacity for domestic violence victims
- Seattle, Washington – Address homelessness (using 38% of ARPA funding)
If you want to learn more about ARP, you can access the full law (Public Law 117-2), read a detailed breakdown prepared by the National Council of State Legislatures, and read the Treasury Department’s ARP fact sheet.
