Treasury to Begin Distribution of $350 Billion for State, Local Governments

Vice President Kamala Harris and House Speaker Nancy Pelosi of Calif., stand and applaud as President Joe Biden addresses a joint session of Congress, Wednesday, April 28, 2021, in the House Chamber at the U.S. Capitol in Washington.

Vice President Kamala Harris and House Speaker Nancy Pelosi of Calif., stand and applaud as President Joe Biden addresses a joint session of Congress, Wednesday, April 28, 2021, in the House Chamber at the U.S. Capitol in Washington. Melina Mara/The Washington Post via AP, Pool

 

Connecting state and local government leaders

The guidance released Monday gives governments wide latitude in spending American Rescue Plan funds.

The Treasury Department will begin to distribute $350 billion in federal aid to state and local governments in the coming days, officials announced Monday as they issued long-awaited guidance on how the funds can be spent. 

From covering payroll and benefits for public health workers primarily deployed to respond to the coronavirus pandemic to replenishing unemployment insurance trust funds, the guidance provides state and local governments specifics on a broad range of spending options eligible under the American Rescue Plan. 

The guidance also outlines when governments can expect to receive tranches of money and provides more specificity on ineligible expenditures, such as use of the funds to replenish rainy day funds or to offset a reduction in taxes. 

State and local governments may use the funding to address need in six broad areas:

  • Support a range of public health needs, including coronavirus mitigation efforts. 
  • Alleviate economic hardship the pandemic caused for businesses, workers and affected industries.
  • Provide aid for hard-hit communities.
  • Replace lost government tax or fee revenues.
  • Provide hazard pay for essential workers.
  • Invest in water, sewer and broadband infrastructure.

The Biden administration plan allocates $350 billion in federal stimulus money to state, local and tribal governments as a way to help communities recover from the economic effects of the coronavirus pandemic.  Under the plan, states and the District of Columbia will receive $195 billion, counties will receive $65 billion, cities will receive $46 billion, and tribal governments will receive $20 billion.

“With this funding, communities hit hard by Covid-19 will be able to return to a semblance of normalcy; they’ll be able to rehire teachers, firefighters and other essential workers, and to help small businesses reopen safely,” said Treasury Secretary Janet Yellen.  

The funding can be used to cover a broad range of government operations expenses, including payroll and benefits for public health and public safety employees whose units or divisions are primarily dedicated to coronavirus response efforts. It can also be used to provide “premium pay” to nongovernment essential workers (either directly or through grants to private employers) such as child care or sanitation workers or staff at nursing homes. 

Since the American Rescue Plan was signed into law in March, state and local government leaders have anxiously awaited additional guidance on how the money can be spent. State leaders have specifically raised concern about a last-minute addition included in the legislation that prevents states from using the money to pay for tax cuts—and some states have sued claiming the tax mandate is unconstitutional

The guidance issued Monday provides more clarity on that issue. 

An interim rule that further outlines ineligible spending states that the Treasury Department will use inflation-adjusted fiscal 2019 tax revenue as a baseline for determining whether a state has a net tax reduction. If the state’s tax revenue is greater than that amount, the government will not be considered to have violated the offset provision. 

The Treasury Department’s interpretation means that states could still cut taxes so long as revenue growth is strong, wrote Jared Walczak, the vice president of state projects at the Tax Foundation. 

But if the state’s tax revenue is lower than the 2019 total, the Treasury Department will require the state to identify sources of funds that have been used to offset the total value of tax changes, such as an increase in a tax rate, or spending cuts. 

If states do cut taxes, the guidance says “they must demonstrate how they paid for the tax cuts from sources other than Coronavirus State Fiscal Recovery Funds—by enacting policies to raise other sources of revenue, by cutting spending, or through higher revenue due to economic growth.” If the federal funding is used to offset tax cuts, states will be required to pay back the offset amount to the Treasury Department.

Reductions in spending cannot be in any department or agency where a state has spent the recovery funds, a particularly broad interpretation that could be problematic for states, Walczak wrote. 

“Functionally, accepting federal funds could mean that tax cuts could not be financed by any savings—no matter how far removed from the federal aid—in departments dealing with public health, public safety, education, social services, and certain infrastructure projects,” he said. “This represents a massive federal entanglement in state fiscal authority.”

The Treasury Department indicated that eligible governments could begin to receive funding in the coming days, and the guidance provides more specificity the breakdown of payments. 

States that saw unemployment rates increase by more than 2% since February 2020 will be eligible to receive the full amount of federal coronavirus funding in one lump sum. Other states will receive payments in two equal tranches. States are required to sign certification documents attesting they will spend the money only in certain ways prescribed by the law. The Treasury Department is required to release an initial aid payment within 60 days of a state’s certification.

Local governments will receive funding in two equal tranches, with the first payments beginning this month and the second half delivered a year later.

The executive director of the National Association of Counties, Matthew Chase, said the flexibility in funding will allow local governments to use the money for a wide variety of important projects such as investment in broadband infrastructure and public health measures. 

“This aid represents an historic investment in counties on the front lines of our nation’s coronavirus response and recovery efforts,” he said. 

Andrea Noble is a staff correspondent with Route Fifty.

FEATURED CASE STUDIES
Powered By The Atlas
Crowdfunding Capital for Sustainable Wastewater P3 Project in Los Fresnos, TX
Los Fresnos, TX 78566, USA
Madison Water Utility replaces 8,000 lead service lines
Madison, WI, USA
Corpus Christi Deploys COVID Management System to Improve Data & Eliminate Time-Consuming Tasks
Corpus Christi, TX, USA

NEXT STORY: GOP Governors Move to End Pandemic Unemployment Benefits

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.