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Throughout the United States, local units of government are working to determine how to spend funds from a piece of federal legislation passed in 2021 called the American Rescue Plan Act. These funds have been distributed to nearly all municipalities, and reflect a once-in-a-generation opportunity for cities and towns to address needs that have been underfunded for decades. However, many people do not know what is in this legislation, or why it is so important. Below, answers to many frequently asked questions are laid out.
What is ARPA?
The American Rescue Plan Act of 2021 (ARPA) is a $1.9 trillion stimulus bill passed by the US Congress and signed by President Joe Biden in March of 2021. The bill was a response to the COVID-19 Pandemic and sought to speed the United States’ recovery by addressing both the health and economic impacts of the pandemic. In addition to provisions like direct checks to individuals, an expanded Child Tax Credit, and enhanced unemployment benefits, the bill also included $350 billion in funding to states and local governments to address losses in revenue that they had during the pandemic. In addition to filling these gaps, much of this funding is now available to be spent on key projects in cities and towns across America.
What can Funds Be Used For?
ARPA funds have broad categories that funds can be spent on. Specifically, funds can be spent to:
- Replace lost public sector revenue.
- Support the COVID-19 public health and economic response.
- Provide premium pay for eligible workers performing essential work.
- Invest in water, sewer, and broadband infrastructure.
In supporting the COVID-19 public health and economic response, cities and towns may use funds for a broad array of purposes. These include assistance to impacted households addressing:
- Aid for re-employment
- Job training
- Food, rent, mortgage, and utility assistance
- Affordable housing development
- Childcare
- Early education
- Addressing learning loss
Additional approved uses
Funds may also be used for:
- Assistance to impacted small businesses or nonprofits
- Technical assistance to small businesses
There are additional allowable uses beyond those listed here, and for an overview from the Department of the Treasury, you can read here. For a shortened overview, check out the link here.
What can funds not be spent on?
The uses of state and local funds from ARPA are intentionally broad, but there are clear categories that are not allowable uses of these funds. According to the Department of the Treasury, funds may not be used for:
- A reduction in taxes
- Payments for debt service
- Replenishing “rainy day funds” (government savings accounts)
- Satisfaction of settlements and judgements
- Any other uses that contravene or violate ARPA, conflict of interest requirements, and other federal, state, and local laws and regulations.
When must funds be spent by?
All funds must be used for costs incurred on or after March 3, 2021 and funds must be obligated by December 31, 2024 and spent by December 31, 2026.
Why does this matter?
Funds from ARPA represent a truly once-in-a-generation infusion of funds to local governments. For example, the entirety of the City of Flint’s preliminary 2022-2023 General Fund budget is roughly $72 million. The city’s ARPA funding alone is $94.7 million. A one-time investment of more than an entire year’s General Fund spending is a unique opportunity that could allow the city to invest in key priorities like infrastructure, housing, health, transportation, parks, and more. These funds could have a tremendous impact on addressing the issues that make a city a healthy, welcoming place to live.
Today, governments are deciding how to spend these funds and they are asking residents for their input. Detroit approved its allocation plan for ARPA funds in 2021, and you can read more about that distribution here.
In Flint, final decisions have not yet been made about ARPA spending several community meetings were held by the City Council and by Mayor Neeley. Additional engagement efforts are being undertaken in communities across Michigan and Indiana. All final spending decisions will be made by agreement between appropriate branches of local government, so do make your voice heard!
If you would like to know more, please reach out to Communities First, Inc. at (810) 422-5358 x. 1007 or email jarnold@communitiesfirstinc.org.