States and Localities Poised to Gain New Flexibility With ARPA Funds
A roadworks crew work on road resurfacing on June 24, 2021 in Alhambra, California. Photo by FREDERIC J. BROWN/AFP via Getty Images
The massive spending bill moving ahead in Congress was amended to allow for American Rescue Plan Act aid to go toward new uses, including disaster recovery and transportation infrastructure.
States and local governments stand to gain even greater flexibility with how they can spend federal coronavirus relief dollars, with new leeway to use the money on infrastructure projects and natural disaster relief, under a provision the U.S. Senate added Thursday to the massive year-end spending bill that is chugging ahead on Capitol Hill.
The $1.7 trillion "omnibus" bill cleared the Senate on a 68-29 vote, and now heads to the House, where it is expected to pass on Friday and be sent to President Biden’s desk.
An amendment approved in a voice vote would enable recipients of aid from the American Rescue Plan Act’s State and Local Fiscal Recovery Fund to use up to $10 million, or 30% of their allotments, on a wide variety of transportation projects, covering roads and transit, and on the types of spending allowed under the Community Development Block Grant program.
One limitation written into the amendment says ARPA dollars put toward these newly eligible uses should only supplement other sources of funding and not be swapped in to replace them.
“It unlocks Covid-19 relief money that states and local jurisdictions have that they no longer need for that purpose,” Sen. John Cornyn, a Texas Republican, said on the Senate floor. “It allows them now more flexibility to spend it on infrastructure and disaster relief and the like.”
“And this is the best part about it: It doesn't add a penny to the debt,” he said.
Sen. Alex Padilla, a California Democrat, co-sponsored the amendment. “As we all know each community has been impacted differently by the pandemic and has different needs,” he said.
“This amendment is about flexibility and prioritizing the local governments that are closest to the people,” Padilla added.
Clarence Anthony, CEO and executive director of the National League of Cities, in applauding progress on the spending bill, highlighted the flexibility amendment as a win for cities.
Anthony said the provision would help small cities and towns in particular and that it would enable jurisdictions to coordinate their ARPA spending with programs in last year’s infrastructure law.
A coalition of state and local government organizations, as well as infrastructure and construction industry groups, wrote congressional lawmakers earlier this year and suggested the added flexibility would help governments deal with inflation and other challenges.
“As states continue to recover from the pandemic, new economic headwinds and rising costs have emerged,” the groups wrote. “The ARP funds can help mitigate state budget shortfalls and allow states and localities to address ongoing infrastructure needs that may have been sidelined during the pandemic.”
For some places, a 30% share of an ARPA allotment is a sizable sum of money. For instance, 66 cities were in line to receive awards totaling over $100 million, and 47 counties over $200 million, according to Treasury Department figures.
But many state and local governments have already developed spending plans for their ARPA dollars, and it's unclear how much money they might devote to the newly eligible spending categories if the current version of the omnibus package is approved.
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