American Rescue Plan Provides More Relief to Local Governments
- For an overview of the current ARPA requirements and resources, see our topic page on the American Rescue Plan Act (ARPA).
- This blog post has been updated to reflect the fact that local governments ARE eligible for federal tax credits for any voluntary paid leave provided under the American Rescue Plan Act between April 1, 2021 and September 30, 2021 only. This is a change from what we had originally written and a change from previous federal legislation, which excluded state and local governments from receiving tax credits for any FFCRA leave provided prior to April 1, 2021.
On March 11, 2021, the American Rescue Plan Act ("ARPA" or "ARP") was signed into law, which means many local government agencies in Washington State will receive a new round of relief. ARPA is a $1.9 trillion package that includes direct relief to states, counties, cities, and towns as well as public utilities, libraries, and transit agencies.
Although MRSC does not yet know all the logistics on the rollout of the ARPA funds and programs, this blog will provide preliminary information regarding programs that will be of interest to local governments in Washington State.
County, City, and Town Local Fiscal Recovery Funds
Title IX, Subtitle M (Sec. 9901) of ARPA establishes the State and Local Fiscal Recovery Funds program, adding several sections to Title VI of the Social Security Act. The new Section 603 establishes the Local Fiscal Recovery Fund, discussed here. (Section 602 establishes the State Fiscal Recovery Fund and pertains solely to states, territories, and tribes.)
Final numbers have not been released, but the U.S. Conference of Mayors has shared an early estimate (Excel download) of how much direct relief will be received by local counties, cities, and towns. (There are separate tabs for metro cities, counties, and other non-counties.)
The U.S. Treasury will disburse payments in two installments, or “tranches,” with the first distribution no later than May 10, 2021, and the second distribution no earlier than twelve months after the first payment.
Counties and designated “metropolitan” cities will receive their first tranche/distribution directly from the U.S. Treasury no later than May 10, 2021.
All other cities and towns will receive their distributions through the State. The State has an additional 30 days to distribute the recovery funds to recipients which means those cities would receive their distribution by June 9, 2021. The State can apply for a 30-day extension should distribution of the funds cause an “excessive administrative burden,” in which case those cities would receive their distribution at the latest by July 9, 2021.
These local fiscal recovery funds will remain available to cover qualifying expenses through December 31, 2024. ARPA funds can be used by local governments:
- To respond to the public health emergency caused by COVID-19;
- To provide assistance to households, small businesses, and nonprofits related to the negative economic impacts of COVID-19;
- To aid impacted industries such as tourism, travel, and hospitality;
- For premium pay (hazard pay) up to $13/hour, not to exceed $25,000 to any individual employee, to eligible local government essential workers;
- For grants to eligible private employers to provide hazard pay to essential workers;
- To provide government services to the extent of the reduction in revenue of such cities/counties due to COVID-19 relative to revenues collected in the most recent full fiscal year prior to the emergency (for cities and counties in Washington, the baseline would be the calendar year 2019 budget); or
- To make necessary investments in water, sewer, or broadband infrastructure.
As it did with the CARES Act, the U.S. Treasury Department is expected to issue more detailed guidelines for the expenditure of funds in the near future. We will post links to this guidance on our website once it is available.
Local governments may also transfer funds to private nonprofit organizations, a public benefit corporation involved in the transportation of passengers or cargo, or a special purpose unit of a State or local government. The legislation does make clear that ARPA funds may not be used for deposit into any pension fund under any circumstances.
When transferring funds to private organizations or individuals, local governments must be mindful of the prohibition on gifts of public funds in Washington State. Historically, MRSC has advised agencies that contributions of funds in the form of grants or loans is generally prohibited. On March 17, 2020, the Washington Attorney General issued a memo to state and local governments clarifying that public funds may be spent “for the primary purpose of protecting and promoting public health which may have an incidental benefit on private citizens and entities.” On April 6, 2020, the Attorney General’s Office issued further guidance that “loans or grants are permissible if local governments can establish a clear nexus between such programs and either protecting the local economy or promoting compliance with public health guidelines.”
Local governments are ultimately responsible for the appropriate use of funds and should ensure that proper internal controls are in place, as well a proper documentation of expenditures. If your local government chooses to transfer ARPA funds to another agency, it should have appropriate contract language to ensure compliance and guidance standards are being met.
Utility Ratepayer Protection
ARPA appropriates $500 million to the Secretary of Health and Human Services for public drinking and wastewater services (see Section 2912). These funds are directed towards reducing the arrearages of low-income households, particularly those with the lowest incomes, that have been impacted by the COVID-19 pandemic. Grants will provide funding to “owners and operators of public water systems or treatment works.”
As of the publication date of this blog, the US Department of Health and Human Services (HHS) has yet to post information regarding ARPA grants on the Coronavirus (COVID-19) Grant Opportunities and Guidance webpage.
Additionally, ARPA appropriates $4.5 billion to the Low-Income Home Energy Assistance Program (LIHEAP) (see Section 2911). LIHEAP is a federal program that provides energy assistance to eligible households. Washington State’s LIHEAP program is administered through the Department of Commerce, which maintains a LIHEAP webpage that includes information about eligibility, services, and county-specific links. Since households are responsible for applying for LIHEAP assistance, local energy utilities may want to provide information about LIHEAP on their website and/or include information with their billings. Households that qualify for support will have payments paid directly to their energy utility.
The funds for water and energy assistance are in addition to the amounts appropriated by the Coronavirus Response Relief Supplemental Appropriations Act (CRRSA) and discussed in our recent blog post New Federal Funding for Rent and Utility Assistance.
Another provision of ARPA makes available $30.5 billion in grants from the Federal Transit Administration (FTA) for the operating expenses of public transit agencies (see Section 3401). These grants can be used for:
- Operating expenses to maintain service (including purchase of personal protective equipment, or PPE); or
- Payment of administrative leave due to reductions in service.
Expenses must be included in a transportation improvement plan, long-range transportation plan, statewide transportation plan, or statewide transportation improvement plan.
As of the publication date of this blog, the FTA does not have information regarding the new appropriations. Information regarding programs under the CARES Act and the Coronavirus Response and Relieve Supplemental Appropriations Act (CRRSA) can be found on the FTA American Rescue Act Plan of 2021 webpage.
ARPA appropriates $200 million to the Institute of Museum and Library Services (IMLS) for the necessary expenses to carry out museum and library services (see Section 2023). 89% of these funds will be distributed to state library agencies, which will be responsible for administering these funds to local libraries. Once available, information on the ARPA grants will be on posted on the Washington State Library Grants Information webpage.
The Families First Coronavirus Response Act in 2020 required employers to provide additional paid leave to qualifying employees related to COVID-19. This requirement expired on December 31, 2020.
However, as part of the CRRSA, employers were given the option to allow employees who did not exhaust their FFCRA leave to use any remaining leave until March 31, 2021. ARPA gives employers the option to give workers an additional 10 days of leave for the same qualifying reasons under FFCRA, and adds the additional qualifying reason for the leave (see Section 9641):
[If] the employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of, COVID–19 and such employee has been exposed to COVID–19 or the employee’s employer has requested such test or diagnosis, or the employee is obtaining immunization related to COVID–19 or recovering from any injury, disability, illness, or condition related to such immunization...
The new, additional 10 days of leave, with the newly added reason for qualification, are available beginning April 1, 2021 until September 30, 2021. Employers are not mandated to offer the additional 10 days of leave.
In a change from the original FFCRA legislation – and contrary to what we had originally written in this article – local governments are eligible for federal tax credits on their Form 941 for any paid leave provided voluntarily under ARPA between April 1, 2021 and September 30, 2021.
Previously, “certain governmental employers” including “the government of any State or political subdivision thereof” had been excluded from receiving tax credits for any FFCRA leave provided before April 1, 2021. However, the definition of “certain governmental employers” has been changed in ARPA and no longer prevents state or local governments from receiving tax credits for the period covered by ARPA. For more information, see the IRS webpage on tax credits under the American Rescue Plan.
Other Grant Opportunities
The ARPA legislation is over six hundred pages long, and this article only covers areas most pertinent to local governments. Also included in ARPA are several other potential grant opportunities for local governments. Your agency may want to pursue funding available in these areas, such as:
- Block grants for community mental health services (Section 2701)
- Block grants for prevention and treatment of substance abuse (Section 2702)
- Grants for local substance use disorder services (Section 2706)
- Grants for local behavioral health needs (Section 2707)
- Homelessness assistance and supportive services (Section 3205)
As we receive new information regarding ARPA, we will update you through our blog, website, and e-newsletters. Also, be sure to check the Government Finance Officers Association webpage on American Rescue Plan Act Spending: Recommended Guiding Principles, which provides useful guidance on how to plan for expenditures.
Since ARPA was just passed, granting agencies do not have information about their programs related to the legislation. Check the program links listed in this post periodically over the next weeks in order to keep apprised of updates. For additional questions, please do not hesitate to email me, use our online Ask MRSC form, or call us at (206) 625-1300 or (800) 933-6772.
MRSC is a private nonprofit organization serving local governments in Washington State. Eligible government agencies in Washington State may use our free, one-on-one Ask MRSC service to get answers to legal, policy, or financial questions.