Update From Washington, D.C.
Treasury Department Issues Final Rule for ARPA Fiscal Recovery Fund; Fiscal Year 2022 Budget; Water Resources Development Act Reauthorization
Treasury Department Issues Final Rule for ARPA Fiscal Recovery Fund
On January 6, the U.S. Department of the Treasury issued its Final Rule governing the use of State and Local Fiscal Recovery Fund dollars. The Recovery Fund, which was authorized by the American Rescue Plan Act (ARPA), provides a total of $7.7 billion in direct, flexible COVID-19-related fiscal relief to California’s counties.
The Final Rule takes effect on April 1, 2022 and provides additional clarity and flexibility for state, local, tribal and territorial governments. It should be noted that jurisdictions can choose to take advantage of the Final Rule’s new flexibilities and simplifications immediately. Until April 1, Treasury’s Interim Final Rule (IFR) remains in force; accordingly, jurisdictions that use funds consistently with the IFR while it is in effect are in full compliance with the Recovery Fund program.
Among other revisions, the Final Rule allows counties to use up to $10 million in ARPA Recovery Funds for the provision of government services without having to go through a complicated revenue loss calculation (referred to as the so-called “standard allowance” option). If a county chooses to calculate actual revenue loss according to Treasury’s formula, they may do so on a calendar or fiscal year basis and must adjust actual revenue totals for the effect of tax cuts and tax increases that are adopted after January 6, 2022 to more accurately reflect pandemic-related revenue loss.
The Final Rule also expands eligible uses for water and sewer projects to include culvert repair, dam and reservoir rehabilitation, and stormwater infrastructure. Similarly, the rule expands eligible broadband investments to allow recipients to address access, affordability & reliability challenges.
In addition, the rule clarifies how counties can use Recovery Funds for certain capital expenditures to respond to public health and economic impacts, with recipients (other than Tribal governments) required to complete written justification for capital expenditures at or over $1 million. The rule also expands support for public sector hiring/capacity and streamlines options to provide premium pay for essential workers.
The full text of the Final Rule is available here and a user-friendly overview of the major provisions can be accessed here. The Treasury Department also recently posted a webinar and slide presentation on the Final Rule.
Fiscal Year 2022 Budget
Faced with a February 18 deadline to pass a new budget for the current fiscal year, House and Senate appropriators met earlier today to discuss a potential path forward on an omnibus spending deal that would fund government operations through September 30. In the absence of a full-year appropriations package, federal departments and agencies have been funded at fiscal year 2021 levels via a series of short-term Continuing Resolutions.
While partisan disagreements persist regarding topline spending levels for domestic and defense programs alike, lawmakers also have been fighting over whether to include a number of policy provisions as part of this year’s budget. Disagreements range from whether to retain controversial policy riders that have been in place for years to the inclusion of several new policy and authorizing provisions.
Finally, several key lawmakers indicated this week that they expect the White House to request a fiscal year 2022 emergency appropriations package to support the government’s ongoing response to the Omicron variant of the coronavirus. The forthcoming supplemental spending request also will likely include disaster aid to help areas hit by recent tornadoes.
Water Resources Development Act Reauthorization
Earlier this week, the House Transportation and Infrastructure Committee and the Senate Environment and Public Works Committee held hearings to examine the Biden administration’s priorities for a new Water Resources Development Act (WRDA). The hearings were a precursor to what is expected to be forthcoming committee action aimed at renewing WRDA, which authorizes infrastructure projects and programs under the purview of the U.S. Army Corps of Engineers.
The committees received testimony from Mike Connor, the Assistant Secretary of the Army for Civil Works, and Lieutenant General Scott Spellmon, the Chief of Engineers and Commanding General of the Corps. Both witnesses highlighted the Biden administration’s ongoing efforts aimed at developing and implementing programs and projects that enhance resilience to climate change and extreme weather events. Likewise, and among other key priorities, the witnesses underscored the administration’s goal of helping disadvantaged communities reduce their risks and adapt to a changing climate.