Treasury Releases Guidance on State and Local Fiscal Recovery Funds from American Rescue Plan Act

May 19, 2021

On May 10, the Department of the Treasury released allocation amounts for direct recipients of Coronavirus State and Local Fiscal Recovery Fund dollars — flexible federal aid provided through the American Rescue Plan Act – and opened the online portal for counties to request the first tranche of their two distributions of funding.

Treasury also released a set of Frequently Asked Questions and an Interim Final Rule, which provides guidance in determining eligible uses of the funds.  The statutory language of the American Rescue Plan Act outlines broad purposes for which the funds may be used:

  • Responding to the public health emergency or its negative economic impacts
  • Providing premium pay to eligible workers
  • Providing government services to the extent of the reduction in revenues due to COVID–19 relative to revenues collected in the most recent full fiscal year prior to the public health emergency
  • Making necessary investments in water, sewer, and broadband infrastructure

Treasury’s Interim Final Rule (which took effect May 17, the date of its publication in the Federal Register) supplies “guidelines and principles for determining the types of programs and services that this funding can support, together with examples of allowable uses that recipients may consider” in each category outlined above.  For each category of potential uses, Treasury includes a series of questions on which it invites comments.  Comments are due by July 16; details on submitting comments may be found at this link.

County allocations may be found at this link.  Allocations for metropolitan cities may be found at this link.  Aggregate amounts of funding for the non-entitlement units in each state may be found at this link (smaller cities and towns in Virginia will receive approximately $634 million); Treasury is expected to provide additional details on these allocations soon.

State budget language requires that any direct federal pandemic relief funding received by the state after January 1, 2021, be appropriated through the state budget process, rather than being directed by the Administration.  Concern has been expressed about how this language might be interpreted with respect to federal funding that is merely passed through the state, such as the Fiscal Recovery Fund dollars for the non-entitlement units.  Secretary of Finance Aubrey L. Layne, Jr., suggested a process to the House Appropriations and Senate Finance and Appropriations Committees this week in which the Administration would inform the legislature about its intention to distribute such non-discretionary funding, and would move forward with the distribution in the absence of legislative objections.

Use of the state’s $4.3 billion in Fiscal Recovery Funds is expected to be the subject of a special session this summer.  On May 12, Governor Northam and Democratic leadership in the House and Senate released a statement outlining shared priorities for these dollars.  The statement highlights five key areas for investment:

  • public health (to include upgrading state and local public health services, as well as assisting with housing and utility costs);
  • aid to small businesses (to include funding for the Rebuild Virginia small business recovery plan; assistance for hard-hit industries, such as restaurants, hotels, museums, gyms, and theaters; tourism promotion; and community revitalization);
  • assistance to workers (to include replenishing the Unemployment Trust Fund and upgrading information technology at the Virginia Employment Commission);
  • help for public schools (to include rehabilitating and upgrading existing facilities and improving air quality and HVAC systems); and
  • broadband deployment

VACo and VML have encouraged the state to collaborate with local governments in the use of these funds, so that state and local efforts can be complementary and not duplicative, a proposal outlined in a recent op-ed by VACo President Jeffrey C. McKay and VML President Willie Greene.  Initial discussions with the Administration are underway, and VACo looks forward to a productive collaboration as state and local leaders work to maximize this once-in-a-generation infusion of federal resources.

VACo Contact:  Katie Boyle

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