Biden's ARP Act 2021

How the Funds of the American Rescue Plan Act of 2021 Can Be Used

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The American Rescue Plan Act of 2021 includes $350 billion in funding for States, Tribal governments, counties, cities, and small local governments.  How those funds can be used, at this point at least, is defined in a “guidance” document from the U.S. Treasury Department and detailed in a 158-page “Interim Final Rule.”  Because it’s an “interim final” instead of a “final” rule, any of the following could be changed in the future.

According to Treasury documents, Mississippi will receive the following amounts for general use (subject to the guidelines), half arriving this month (May), with the other half to be provided within 12 months.

  • State: $1.8 billion
  • Counties: $578 million
  • “Metropolitan cities”*: $101 million
  • Non-Metro cities: $268 million
  • Total: $2.754 billion

*Jackson, Southaven, Hattiesburg, and several Coast cities

In addition, more than $2 billion will go directly to the state department of education and to colleges and universities, and additional amounts (unknown at this point) will go directly to other departments, such as mental health.

Support public health response

Funds may be used to provide services to contain and mitigate the spread of COVID-19, including vaccination, medical expenses, testing, contact tracing, quarantine costs, capacity enhancement (including facilities), public health data systems, etc.

Behavioral health care services, including mental health or substance-misuse treatment, crisis intervention, etc.

Payroll and covered benefits for public health, healthcare, human services, and public safety staff for the time they work on the COVID-19 response

Premium pay for essential workers

Funds may be used to provide premium pay up to $13/hour above normal pay (max of $25,000 above) to essential workers, both directly and through grants to third-party employers.  Not to be used for telework employees. Should prioritize low- and moderate-income workers.  Key sectors include healthcare, grocery and food services, education, childcare, sanitation, and transit

Must be fully added to a workers wages in order to be an eligible use of funds, not used to reduce state or local payroll expense.

Replace public sector revenue loss

Funds may be used to ensure continuity of “vital government services” by filling budget shortfalls.  Revenue loss is calculated by comparing actual revenue to the revenue that would have been collected for the year if not for the pandemic, using a 4.1% annual growth rate from FY2019.  For illustration purposes, if a state or local government had revenue of $100 million in FY2019, their “expected” revenue for FY2020 would be $104.1 million.  If actual revenue was $102 million, for example, they would be able to use ARPA funds to replace the $2.1 million “shortfall.”

Water and sewer infrastructure

Treasury is giving state and local governments “wide latitude to identify investments in water and sewer infrastructure that are of the highest priority for their own communities, which may include projects on privately-owned infrastructure.”  The guidance specifically includes eligibility for projects that improve access to clean drinking water, or improve wastewater and stormwater infrastructure systems, such as building or upgrading facilities and transmission, distribution, and storage systems.

Funds may be used for projects aligned with EPA categories for the Clean Water State Revolving Fund (which includes projects to construct, improve, and repair wastewater treatment plants, control non-point sources of pollution, etc.) and the Drinking Water State Revolving Fund (which includes the installation and replacement of failing treatment and distribution systems).

The Treasury guidance says, “Treasury encourages recipients to ensure that water, sewer, and broadband projects use strong labor standards, including project labor agreements and community benefits agreements that offer wages at or above the prevailing rate and include local hire provisions.”  It also says, “Treasury encourages recipients to consider green infrastructure investments and projects to improve resilience to the effects of climate change.”

“Equity-focused” services

Additional flexibility is provided for the hardest hit communities and families to address health disparities, by addressing the “social determinants of health,” such as, housing, education access, and others that support a healthy childhood environment (including lead paint remediation and community violence interventions).  Broadly applicable to Qualified (low income) Census Tracts, other disproportionately-impacted areas, and tribal governments

Address negative economic impact

Although the guidance says “aid to individuals or businesses that did not experience a negative economic impact from the public health emergency would not be an eligible use under this category,” most uses are “presumed” to be eligible simply because they are done in a low-income area or for “low- or moderate-income” recipients, whether their hardship is truly related to the pandemic or not.

Funds may provide assistance to workers and families, including:

  • retraining and other support for unemployed workers;
  • aid to households (food, rent, utilities, legal help to prevent eviction, etc.);
  • survivors’ benefits for families of COVID-19 victims;
  • small businesses loans, grants, in-kind assistance (including for revenue losses);
  • business counseling programs;
  • special assistance for the tourism, travel, and hospitality sectors;
  • rehiring government staff;
  • replenishing state unemployment insurance funds;
  • increasing the number of “affordable and high-quality living units,” and increasing access to housing among “unhoused individuals” (i.e., people formerly known as homeless);
  • housing “vouchers” to “facilitate household moves to neighborhoods with high levels of economic opportunity and mobility” and “reduce concentrated areas of low economic opportunity;”
  • new or expanded “high-quality” childcare;
  • “structured visits” by health and education professionals to pregnant women and families with young children;

State and local governments “should also consider whether impacts were due to the COVID-19 pandemic, as opposed to longer-term economic or industrial trends unrelated to the pandemic.”

Broadband infrastructure

Funds may be used to expand broadband availability for unserved and underserved households and businesses.  Funds must provide connections of at least 100 Mbps download/100 Mbps upload speeds, unless that’s impractical, in which case the minimum is 100 Mbps download/20 upload.

Ineligible uses

  • Replacing reduced revenue due to newly enacted tax cuts.  If a cut in the tax rate occurs due to prior action (such as the phase out of the franchise tax in Mississippi that was set in place a few years ago), it won’t be counted against the state.
  • Making deposits in rainy day funds
  • Making deposits into a retirement fund (such as PERS, the Public Employee Retirement System) other than normal payroll deposits
  • Making payments for debt incurred prior to March 3 of this year.

The Treasury guidance says, “The examples listed are not exhaustive, do not describe all terms and conditions associated with the use of this funding, and do not describe all the restrictions on use that may apply.”


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