Treasury Issues Final Rule for State and Local Fiscal Recovery Funds Program

Today, the U.S. Department of the Treasury issued the Final Rule for the State and Local Fiscal Recovery Funds (SLFRF) program, enacted as a part of the American Rescue Plan, which delivers $350 billion to state, local, and Tribal governments to support their response to and recovery from the COVID-19 pandemic.

The SLFRF program ensures governments have the resources needed to respond to the pandemic, including providing health and vaccine services, supporting families and businesses struggling with the pandemic’s economic impacts, maintaining vital public services, and building a strong and equitable recovery.

The final rule – which takes effect on April 1, 2022 – provides state and local governments with greater flexibility to pursue a broader range of uses and more simplicity so governments can focus on responding to the crisis in their communities and maximizing the impact of their funds.

Key Changes and Clarifications In the Final Rule

The final rule delivers broader flexibility and greater simplicity in the program, responsive to feedback in the comment process. Among other clarifications and changes, the final rule provides the features below.

Replacing Lost Public Sector Revenue

Allows counties to use up to $10 million in ARPA Recovery Funds for government services without completing a complicated “revenue loss” calculation. The National Association of Counties (NACo) championed this bipartisan provision

Water, Sewer, & Broadband Infrastructure

The final rule significantly broadens eligible broadband infrastructure investments to address broadband access, affordability, and reliability challenges. In addition, the final rule expands eligible uses for water and sewer projects to include culvert repair, dam and reservoir rehabilitation, and stormwater infrastructure.

Public Health and Economic Impacts

In addition to programs and services, the final rule clarifies that recipients can use funds for capital expenditures that support a qualified COVID-19 public health or economic response. For example, recipients may build affordable housing, childcare facilities, schools, hospitals, and other projects consistent with final rule requirements.

In addition, the final rule provides an expanded set of households and communities that are presumed to be “impacted” and “disproportionately impacted” by the pandemic, thereby allowing recipients to respond to a broad set of households and entities without requiring additional analysis.

Further, the final rule provides a broader set of uses available for these communities as part of COVID19 public health and economic response, including making affordable housing, childcare, early learning, and services to address learning loss during the pandemic eligible in all impacted communities and making specific community development and neighborhood revitalization activities eligible for disproportionately impacted communities. Further, the final rule allows for a broader set of uses to restore and support government employment, including hiring above a recipient’s pre-pandemic baseline, providing funds to employees that experienced pay cuts or furloughs, avoiding layoffs, and providing retention incentives.

Premium Pay

The final rule streamlines options to provide premium pay by broadening the share of eligible workers who can receive premium pay without a written justification while focusing on lower-income and frontline workers performing essential work.

NACo National Membership Call

Join NACo on Monday, January 10 at 1:00 pm to overview the Treasury’s Final Rule for the Recovery Fund, including key highlights for counties.

According to a U.S. Department of the Treasury press release:

To date, Treasury has distributed more than $245 billion to state, local, and Tribal governments as a part of the SLFRF program, accounting for over 99% of funds eligible to be disbursed in 2021 – including funds to many communities that had not received federal assistance since the onset of the pandemic. Recipients of funds were encouraged to begin using funds under the interim final rule, which was released in May 2021. Governments have been spending these funds to address the COVID-19 pandemic and its economic effects, including by expanding access to testing, vaccines, and taking other steps to protect their communities including those that are high-risk and underserved. A recent analysis by the Center on Budget and Policy Priorities found that state governments have appropriated nearly 70% of their available funds as of November 2021.

“Through the State and Local Fiscal Recovery Funds, the American Rescue Plan has provided state and local governments with the support they need to respond to the ongoing pandemic and plan for an equitable recovery,” said Deputy Secretary of the Treasury Wally Adeyemo. “As the Delta and Omicron variants have illustrated, pandemic response needs will continue to evolve. These funds ensure that governments across the country have the flexibility they need to vaccinate their communities, keep schools open, support small businesses, prevent layoffs, and ensure a long-term recovery.”

Click here to view the final rule text. Click here to view a user-friendly overview of the significant provisions of the final rule.

Explore NACo’s State and Local Recovery Fund resource hub and database of planned ARPA Recovery Fund investments, sourced from official county documents, including U.S. Treasury’s Recovery Plan Performance Reports, press releases, and budgeting materials.

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