Throughout the COVID-19 pandemic, state, local, and Tribal governments have been on the frontlines, organizing and providing essential medical care and navigating the endless complications created by shutdowns in their communities. Until now, these government agencies have received aid to directly support COVID-19 responses, but not address disastrous budget deficits, looming layoffs and other emerging issues.
That all changed on March 11, when President Biden signed the American Rescue Plan Act of 2021 into law. The bill allocates $432 billion in direct financial support to U.S. territories, states, and local and tribal governments. In the following, we highlight how the bill affects state, local, and Tribal governments, and breakdown the details of key provisions.
American Rescue Plan of 2021: Impact on State, Local and Tribal Governments
The American Rescue Plan of 2021 contains wide-ranging programs designed to support state, local, and Tribal governments through the financial crises resulting from the COVID-19 pandemic. These include active support for COVID-19 response and planning, funds for in-state capital improvement projects, emergency housing support, and much more.
Much of the relief funding is allocated and disbursed automatically using metrics that include population, economic conditions, and unemployment rates. While each program has different disbursement details, broadly speaking, payments are delivered in two or more installments, the first coming within a 60-day window following the bill becoming law, and future installments through 2022 and beyond.
Other programs will require state and local authorities to apply for grants based on specific needs.
One of the highlights of the revised funding and plan is looser restrictions on how funds from the Coronavirus State Fiscal Recovery Fund can be utilized. The accepted uses include:
• Funding government services that have been curtailed due to decreases in tax revenue caused by the pandemic.
• Aid to households, small businesses and nonprofits, and impacted industries like tourism, hospitality and travel.
• Making “necessary investments” in water, sewer, or broadband infrastructure.
While potential uses have been broadened, all programs require stringent rules for intended use, tracking and reporting.
Highlights of the American Rescue Plan of 2021
Coronavirus State Fiscal Recovery Fund
50 States and the District of Columbia receive $195.3 billion in aid:
- $25.5 billion will be split evenly among each state and the District of Columbia, with each state and the District of Columbia receiving $500 million in aid.
- $168.55 billion distributed based on each state’s share of total unemployed workers over the period of October 2020 to December 2020.
- District of Columbia receives additional $1.25 billion.
- Tribal governments receive $20 billion (further discussion to come).
- U.S. territories receive $4.5 billion.
- U.S. Treasury receives $50 million to cover costs of administration of the fund.
Coronavirus Local Fiscal Recovery Fund
Local governments to receive $130.2 billion in aid to be split among counties, metropolitan cities, and non-entitlement units of local government:
- Counties receive $65.1 billion in population-adjusted payments, with additional adjustments for Community Development Block Grant (CDBG) recipients.
- Metropolitan cities receive $45.57 billion.
- Non-entitlement units of local government receive $19.53 billion, distributed by individual states and funded by the U.S. Treasury. Each jurisdiction receives population-adjusted payments based on such jurisdiction’s share of the state population.
Coronavirus Capital Projects Fund
$10 billion available for states, territories, and Tribal governments to support critical capital projects directly enabling work, education and health monitoring in response to COVID-19:
- Each state receives $100 million.
- U.S. territories receive $100 million to be split among them.
- Tribal governments and the state of Hawaii receive $100 million to be split among them.
- Remainder of funds to be allocated to states based on population.
NOTE: The Treasury Department will establish an application process for grants from the fund within 60 days of enactment of the law.
Local Assistance and Tribal Consistency Fund
$2 billion for eligible revenue-sharing counties and tribal governments:
- Eligible revenue-sharing counties will receive $750 million allocated based on economic conditions for each FY 2022 and FY 2023.
- Eligible tribal governments will receive $250 million allocated based on economic conditions for each FY 2022 and FY 2023.
NOTE: Payments from this fund may be used for any governmental purpose other than a lobbying activity and will remain available until September 30, 2023.
Other State, Local, and Government Funding Sources
Additional federal government programs have received funding earmarked to support recovery efforts in states, Tribes, and territories. These funds can be applied for via grant applications depending on each government agency’s circumstances.
Homeowner Assistance Fund
$10 billion allocated to states, territories, and tribes through grants to prevent homeowner mortgage defaults, foreclosures, and displacements.
Funds may be used to reduce mortgage principal amounts, assist homeowners with housing payments and other aid needed to prevent eviction, mortgage default, foreclosure, or the loss of utility services.
Funds may also reimburse state and local governments that have provided similar assistance since January 2020.
Each state, along with the District of Columbia and Puerto Rico, will receive at least $50 million. Additional amounts will be set aside for other U.S. territories and tribes.
States, territories, and Tribes receiving funding will have to set aside at least 60% of their allocation to assist homeowners who make less than 100% of the local or national median income.
Homelessness Assistance and Supportive Services Program
$5 billion allocated to state and local governments to provide supportive services for homeless and at-risk individuals. Permitted fund uses include tenant-based rental assistance, housing counseling and homeless prevention services, and acquiring non-congregate shelter units.
Low-Income Home Energy Assistance Program (LIHEAP) and Water Assistance Program
$4.5 billion allocated to fund the LIHEAP program, and $500 million provided in state grants to assist low-income households with drinking water and wastewater services.
FEMA Disaster Relief Fund
$50 billion to reimburse state and local governments for the costs of ongoing COVID-19 response and recovery activities, and other emergencies.
Funding to remain available through FY 2025.
Final thoughts
With billions of dollars in aid becoming available to state, local and tribal government agencies, the use of these funds is going to be tracked very closely by federal regulators. If you have any questions about how funds can be utilized, and how to track and report this use, MGO’s dedicated State and Local Government team can help. Contact Us.