Local governments eye Rescue Plan Act stimulus funds

Article was written by Amy Greil, Community Development Extension Educator. 
Originally published in The Kenosha News.

Perhaps you have heard that in March of this year, the American Rescue Plan Act (ARPA) of 2021 was signed into law.

It provides $1.9 trillion in economic stimulus to aid the recovery from the COVID-19 pandemic.

ARPA created the Coronavirus State and Local Fiscal Recovery Fund which provides $350 billion for states, counties, municipalities, tribes, and territories, including $130 billion for local governments split evenly between municipalities and counties.

ARPA will provide Wisconsin counties, cities, and local jurisdictions approximately $3 billion. Localities will receive the funds in two tranches — the first, after the U.S. Treasury certifies the proceeds to each jurisdiction and the second, one year later.

Funding must be spent by the end of calendar year 2024. Estimates of the allocations to Wisconsin local government entities are available online and this list will be updated after the U.S. Treasury certifies each jurisdiction’s proceeds.

The U.S. Department of the Treasury is responsible for distributing the funding, and they are currently developing methods and guidance for the allocation and oversight process.

Analysts note that the law includes these eligible ARPA uses:

Revenue replacement for the provision of government services to the extent of the reduction in revenue due to the COVID-19 public health emergency, relative to revenues collected in the most recent fiscal year prior to the emergency

COVID-19 expenditures or negative economic impacts of COVID-19, including assistance to small businesses, households, hard-hit industries, and economic recovery

Premium pay for essential workers

Investments in infrastructure

Restrictions on the uses of these funds include:

Funds allocated to states cannot be used to directly or indirectly offset tax reductions or delay a tax or tax increase

Funds cannot be deposited into any pension fund

Many associations and organizations are encouraging their town, city, village and county members to focus the spending on one-time investments, not reoccurring expenditures.

Temporary nature

According to information supplied by the Government Finance Officers Association, ARPA funds are non-recurring so their use should be applied to one-time investments. Avoid creating new programs or add-ons which will require an ongoing financial commitment. Replenishing reserves used to offset revenue declines during the pandemic should be given high priority to rebuild financial flexibility/stability and restore fiscal resiliency.

Use of ARPA funds to cover operating deficits caused by COVID-19 should be considered temporary and additional budget restraint may be necessary to achieve/maintain structural balance in future budgets.

Investment in critical infrastructure is a particularly well-suited use of ARPA funds because it is a non-recurring expenditure that can be targeted to strategically important long- term assets that provide benefits over many years. However, care should be taken to assess any on-going operating costs that may be associated with the project.

It’s important to note that the final rules and regulations on how these funds may be used have not yet been released to local governments.

For those interested in working through or with their local governmental units to define priorities and guide inclusive decision-making, consider attending the Competitive Wisconsin ARPA Summit on June 23 (free and virtual). More details and registration information can be found at https://localgovernment.extension.wisc.edu/.

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