The phrase “claw back” is so supremely descriptive that when debt ceiling negotiations started using the phrase and ARPA in the same breath, cities and counties took notice.
President Biden signed the Fiscal Responsibility Act of 2023 only two days before the US Government exhausted its borrowing authority, and therefore, its ability to spend freely.
Amid the May negotiations we monitored the risk to the ARPA’s State Local Fiscal Recovery Funds (SLFRF). This is the fund which provided mid- and post-pandemic recovery funds to all communities without regard for size and without intervention.
From a federal perspective, the impact of a shutdown was pretty obvious. The news reports each alerted us to the risk to national parks, armed forces payroll, and almost every other federal program and service. They didn’t very often talk about the impact to towns, cities, counties and states.
A similar debt ceiling cycle in 2013 prompted a federal government shutdown lasting 16 days, during which time many services were suspended. The disruption was a challenge for political leadership on both sides of the isle—unable to maintain the basic functions of government—and impactful at all levels. As congress and the executive branch exchanged barbs, states, counties and cities bore the brunt of back-filling sustaining programs.
Confusingly, the law does recall ARPA funds that have not been committed (“obligated” in policy terms) by multiple federal agencies, including the Federal Emergency Management Agency and the Federal Communications Committee.
However, as the Treasury Department has already transmitted all SLFRF funds to local governments (recall the two-tranche distributions in 2021 and 2022), those funds are already considered obligated for federal budgeting purposes, even if they may not have been spent by the municipalities. This means the Fiscal Responsibility Act of 2023 does not impact the ARPA totals, deadlines or reporting tasks.
There are other funds from six other pandemic relief bills, totaling approximately $56 billion, that remain unobligated by federal agencies. These funds may have been rescinded, but this does not include the SLFRF program under ARPA.
Yes, SLFRF Funds Might Still be Available
While SLFRF funds were delivered to your city/county/state in 2021 and 2022, it’s no guarantee that they’ve been spent.
At the National League of Cities Congressional Cities Conference in late March 2023, small, medium and large cities convened to share their experiences. It was one of those ideal situations where people were relaxed, proud of their accomplishments and completely open to sharing.
My meeting notes reflect that many cities used SLRF for allowable expenses, which freed up budget in other areas. I also confirmed the fact that many cities directed portions of their allocated funding towards hyper-local proven non-profits. In other words, flowing the funds to organizations which are already tooled to achieve goals such as hunger, homelessness, and addiction. The Brookings Institute is monitoring spending anecdotes in their report, “As cities and counties commit more American Rescue Plan funds, regional priorities are emerging.”
Many computer systems and related data and technology projects got pushed to top of IT’s priority lists in anticipation of freed-up budget or, in a few cases, with the expectation that the Infrastructure Investment and Jobs Act (aka Bipartisan Infrastructure Deal) will require more of cities to support these projects. That is, newly funded transportation projects will require an abundance of city services as they come through town.
Late Engagement Opportunities
Your City Manager, County Administrator, Budget Manager or equivalent will have a full accounting now of which selected projects might be at risk. In the shuffle, it is not unreasonable to press your shovel-ready project into the conversion. As we discussed in Zen and the Art of ARPA Funding, SLFRF-funded projects (or portions of projects) must be completed by December 31, 2024.