May 20, 2021

On May 17, the U.S. Department of the Treasury published guidance that governs the implementation of the American Rescue Plan Act’s (ARPA) Coronavirus State and Local Fiscal Recovery Funds. While the Interim Final Rule became effective immediately, the Department will accept comments on all aspects of the proposal until July 16, 2021. ARPA provides $350 billion in federal fiscal relief to local governments, with $65.1 billion set aside for counties and another $65.1 billion designated for cities. It should be noted that every county in the country will receive direct aid to help meet ongoing pandemic response and economic recovery needs.

All told, nearly $7.7 billion will be allocated to California’s counties with 50 percent of funds provided this month and the balance distributed roughly 12 months later. Pursuant to the Treasury guidance, fiscal recovery funds can be used to cover costs incurred beginning on March 3, 2021, and all funds must be obligated by December 31, 2024. All funds must be spent and all work completed by December 31, 2026.

Treasury also will be making direct allocations to entitlement cities (generally those with a population over 50,000). Non-entitlement communities will receive their share of recovery dollars through the State. It should be noted that Treasury officials expect to provide further guidance on these distributions in the coming days.

Local fiscal relief funding can be used to:

• Respond to the public health emergency and address its negative economic effects;
• Provide premium pay for essential workers;
• Replace lost public sector revenue; and,
• Invest in water, sewer, and broadband infrastructure.

Within these broad expenditure categories, counties will have a great deal of flexibility to decide how best to use the funding to meet specific community needs. State and local governments also will have the option to transfer funds to a private nonprofit organization, a public benefit corporation, a special-purpose unit of State or local government, etc. Under the Treasury guidelines, the recipient will remain responsible for monitoring, overseeing, and reporting on the sub-recipient’s use of Fiscal Recovery Funds.

Additional information regarding implementation of the Recovery Fund, including the Interim Final Rule, a Fact Sheet, and a Frequently Asked Questions (FAQ) document, can be found here.

Congressional Action

This week, the House approved a number of bills on the non-controversial suspension calendar, including legislation (S 937) to fight Asian American discrimination. Among other things, the bill would award grants to state and local governments to assist their implementation of the Federal Bureau of Investigation’s (FBI) National Incident-Based Reporting System, which collects detailed information on crimes committed in participating jurisdictions. The measure also would direct the Justice Department to award grants to states to establish hate crime reporting hotlines, which would direct callers to law enforcement and to local support services. President Joe Biden is expected to sign the legislation into law today.

Aside from S 937, the bulk of legislative action was reserved for two measures that directly respond to the January 6 attack on the U.S. Capitol. The first bill (HR 3233), which advanced on a vote of 252-175, would establish a national commission to examine the attack on the Capitol complex. Lawmakers also narrowly approve a separate bill (HR 3237) that would provide $1.9 billion in emergency funding to implement additional security measures at the Capitol. Due to insufficient support among Republicans and a lack of coordination between the two chambers, both measures likely face long odds of becoming law.

Across Capitol Hill, the Senate began consideration of legislation – the Endless Frontier Act (S 1260) – to ramp up federal support for U.S. research and development with the aim of increasing competitiveness with, and reducing reliance on, China. Among other things, S 1260 would authorize more than $100 billion over five years to boost research and development of innovative technology and manufacturing at colleges, universities, and other institutions. It also would create a new entity within the National Science Foundation to focus on technology. In addition, the measure would allocate $50 billion to an effort aimed at boosting domestic semiconductor manufacturing, as well as funding for a communications security initiative designed to counter China’s dominance of 5G networks.