State and Local Fiscal Recovery Funds Present Opportunities to Address Needs in Communities

On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA), which includes
$350 billion for state and local governments to pay for much-needed investments to respond to the COVID-19 pandemic and to begin to build back stronger communities. On May 10, 2021, the U.S. Treasury released guidance on how states and localities can use the funds. This document provides a brief overview of the guidance and opportunities that community-based, direct service, statewide, and other organizations can leverage.

Available funds

In the coming months, the North Carolina General Assembly (NCGA) is expected to make decisions about how to allocate some or all of the state’s $5.4 billion from the ARPA. These funds will be above and beyond their work to enact a comprehensive state budget, which uses General Fund dollars generated from state-level taxes.

In addition, local governments are receiving ARPA funding directly from the federal government. All 100 North Carolina counties will receive funds, as will 26 metropolitan cities, and many smaller governments, called non-entitlement areas, such as towns and villages.

North Carolina state and local government units will receive the following in local recovery funds from the U.S. Treasury.[i] 

How funds can be used

State and Local Fiscal Recovery Funds must be allocated by December 31, 2024, and spent by December 31, 2026. Guidance from the U.S. Treasury includes examples of how funds can be used and notes the substantial flexibility of uses, with five broad categories based on the needs of communities. Funds can be used to:

  • Support public health expenditures
  • Address negative economic impacts caused by the public health emergency
  • Replace lost public sector revenue
  • Provide premium pay for essential workers
  • Invest in water, sewer, and broadband infrastructure

Restrictions on how funds can be used

States are not allowed to use ARPA funding to put into the Rainy Day Fund (“Savings Reserve”), pay off debts, or make deposits into pension funds.

Federal fund recipients must also follow restrictions regarding the use of funds to make up for revenue losses, and new net cuts to state tax revenue will result in the equivalent reduction of federal ARPA Fiscal Recovery Funds. The guidance also restricts funds used for general infrastructure beyond broadband, water, and sewer infrastructure.

Key approaches to putting dollars to use

Treasury guidance emphasizes two key strategies for deploying dollars:

  • Prioritizing supports for those hardest-hit by the pandemic given the disproportionate impacts of the public health and economic impact of COVID-19, including in particular low-income workers and communities as well as people of color
  • Engaging constituents and communities in developing plans to allocate dollars given the scale of dollars and the potential they create

While the guidance highlights these key strategies for prioritization and decision-making, it does not include requirements that grantees of federal dollars ask about immigration status. Eliminating this substantial barrier faced by many immigrants creates tremendous opportunity to ensure that everyone in our communities, regardless of their immigration status, can receive the supports they need to keep themselves and their families safe and healthy.

[i] U.S. Department of the Treasury. Coronavirus State and Local Fiscal Recovery Funds. https://home.treasury.gov/policy-issues/coronavirus/assistance-for-state-local-and-tribal-governments/state-and-local-fiscal-recovery-funds

[ii] Ibid

[iii] Ibid