Critics Take Aim at State and Local ARPA Spending on Prisons and Jails

State and local governments that directed federal Covid relief funding toward jail and prison costs are under fire from civil rights advocates.

The American Civil Liberties Union last week urged the Treasury Department's Inspector General to require states and counties that used hundreds of millions of dollars of American Rescue Plan Act aid to build or expand prisons and jails to shift those funds toward expenses more directly related to fallout from the public health crisis.

Treasury’s inspector general’s office has said that a county in Iowa could use the Covid relief funds to expand a juvenile detention facility because governments are allowed to use ARPA money to backfill revenue lost during the pandemic. And under that revenue replacement category they have a great deal of flexibility to spend the funding as they choose.

However, the ACLU in a letter to Treasury’s Office of the Inspector General contends that using the money on prisons and jails is “expressly prohibited” under rules for the law.

“Allowing these plans to continue would divert hundreds of millions of dollars from their intended purpose of rebuilding communities and local economies,” the group wrote in a Jan. 18 letter to deputy inspector general Richard Delmar. The group cited, for example, Alabama’s plans to use $400 million in ARPA funds to help pay for building two new men’s prisons in the state.

The left-of-center organization’s disapproval of the spending comes as critics on the right also question whether states and local governments are using the $350 billion in ARPA funding they received in ways that adhere to the purpose and requirements of the aid program.

Republicans who now control the U.S. House, for example, have promised to hold Treasury accountable for allowing states and localities to use Covid relief money for things like pickleball courts, a hotel in Miami or a tourist attraction to celebrate North Carolina’s history of moonshine.

The Treasury Department referred questions from Route Fifty to its inspector general’s office, which did not respond to a request for comment. 

While critics on both ends of the political spectrum may be eager to seize on spending they don’t like, experts tracking ARPA dollars, like Alan Berube, interim vice president and director of Brookings Metro, noted the high degree of flexibility states and localities have with the aid.

Berube said the final rule for the state and local aid program that Treasury released last year does not explicitly prohibit using the money on prisons and jails, as it does for other purposes like replenishing state pension funds and covering the expense of tax cuts.

Even left-of-center groups, like the Center on Budget and Policy Priorities, have highlighted the wide leeway governments have to spend the relief funds–while also taking the position that the money for corrections could be better spent in other areas. 

Tammie Gregg, deputy director of the ACLU's National Prison Project, however, pointed out in an interview that the Treasury rule also says state and local relief funds have to be used on things “related and reasonably proportional to a harm caused or exacerbated by the pandemic” and that–notably for jail and prison expansion or construction projects–certain capital expenditures may not be eligible.

The rule goes on to say that, for example, building a new correctional facility would generally not meet the requirement for a proportional response to an increase in crime because jails and prisons have historically seen incarcerated populations go up and down. 

Whether Covid funds can be used on building or expanding prisons and jails appears to have even caused some confusion within the Treasury Department itself, ACLU notes in its letter. 

The Inspector General said Scott County, Iowa could use $7.25 million in ARPA funds to expand a juvenile detention center. But initially, A.J. Altemus, acting counsel for Treasury’s IG Office, told The Nation that the money couldn’t be used for the detention center. “General government services” funds cannot be used for jails, Altemus wrote in an email to the Nation, adding: “Capital expenditure restrictions apply" to the use of funding for lost revenue.

However, the ACLU’s letter noted that the department subsequently walked back the quote to the Quad-City Times in September, saying the aid could be used for the detention center because of the flexibility governments have to put the dollars toward “general government services” as part of eligible revenue replacement spending.

"The information provided to the Nation mistakenly conflated the Capital Expenditure- Public Health Negative Economic Impact expenditure category requirements with those of the Revenue Loss expenditure category," Altemus wrote the Times.

Scott County Board of Supervisors chairman Ken Beck did not return a request for comment to Route Fifty. 

But the department’s back and forth has left officials at the ACLU scratching their heads and convinced that the Treasury Department may not be following its own rules.

“The Department of Treasury must give clear guidance on what is prohibited under each of these categories,” the letter said.