Support The Wire

Treasury Department releases guidelines to state and local governments for how they can use COVID-19 relief funds

The US Treasury Department released guidelines today to state and local governments for how they can use funds provided by the American Rescue Plan Act (ARPA) — the COVID-19 stimulus package passed by Congress in March. Treasury also launched an online portal that these governments may use to request their allocation.

In total, ARPA will provide $350 billion to eligible state, local, territorial, and Tribal governments for their continued response to the pandemic. These funds, which are called the Coronavirus State and Local Fiscal Recovery Funds, provide flexibility to governments so they can direct funds based on local needs. Examples of how these funds can be used include replacing lost revenue to shore up public services, providing economic stabilization for households and businesses, and increasing funding for public health measures that could decrease spread of the virus.

Beating this virus means making sure our state, counties, cities, and towns have the resources to continue an effective and strong response—the relief included in the American Rescue Plan will make that possible and today’s announcement from the Treasury Department means we’ll be seeing the impact of this relief soon,” said Washington’s Senior United Senator, Patty Murray.  

Washington is slated to receive $4.427 billion in ARPA funds. Funding for states was calculated based on unemployment averages. King County, the largest in the state, will receive $437.57 million and Pierce County will receive the next most at $175,78 million. The City of Seattle is expected to receive $232 million.

Laying out requirements for the ARPA dollars, Treasury today adopted an Interim Final Rule to implement the Coronavirus State Fiscal Recovery Fund and the Coronavirus Local Fiscal Recovery Fund.

Treasury has determined that local governments will receive funds in two tranches, with 50% provided beginning in May 2021 and the balance delivered approximately 12 months later. If a state has experienced a net increase in its unemployment rate of more than two percentage points from February 2020 to the latest available data as of the date of certification, it will receive their full allocation of funds in a single payment. States that do not meet this criteria will receive funds in two equal tranches.

According to data from the US Bureau of Labor Statistics measuring the change in unemployment rates for states between March 2020 and March 2021, Washington only experienced a 0.1% increase. Barring a drastic turn of events, Washington will be among the states to receive funds in two equal tranches.

Governments of U.S. territories will receive a single payment and Tribal governments will receive two payments. The first payment for Tribal governments will be available in May and the second payment, based on employment data, will be delivered in June 2021.

Following the release of Treasury’s guidelines, some state budget experts stressed the importance of using long-term fiscal analyses to structure their allocation decisions.

The American Rescue Plan Act represents historic investment in state and local governments—approximately $1,000 per American,” said Adam Levin, who researches state fiscal policy for The Pew Charitable Trusts. “The key to ensuring these resources yield returns is not just about the amount of funding – but how that money is spent. State and local leaders should take a long-term perspective on these new funds and analyze what their budgets will look like after this federal relief expires in 2024. Tools like multi-year revenue and expenditure forecasts and budget stress tests can help officials decide how to use this money today without inadvertently creating budget holes tomorrow.”

States have broad flexibility to allocate funds within the scope of five categories:

  • Supporting public health expenditures by funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff.
  • Addressing negative economic impacts caused by the pandemic, including economic harms to workers, households, small businesses, impacted industries, and the public sector.
  • Replacing lost public sector revenue, using this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic.
  • Providing premium pay for essential workers, offering additional support to “those who have and will bear the greatest health risks because of their service in critical infrastructure sectors.”
  • Investing in water, sewer, and broadband infrastructure, making investments to improve access to clean drinking water, support wastewater and stormwater infrastructure, and expanding access to broadband internet.

Upon releasing its Interim Final Rule, Treasury announced that it encourages state, local, territorial, and Tribal governments, as well as other stakeholders, to submit public comments.

Your support matters.

Public service journalism is important today as ever. If you get something from our coverage, please consider making a donation to support our work. Thanks for reading our stuff.