American Rescue Plan Act Guidance
Monday, May 10, 2021, The U.S. Treasury Department issued guidance on Monday which established limits on the $350 billion in direct aid to States and Municipalities issued in the American Rescue Plan. The money was allocated to help state and local governments shore up budget deficiency created by the COVID-19 economic crisis and to reinvest in economic recovery.
The state funding is allocated based on each state’s unemployment rate in the past year. Massachusetts is set to received $5,286,067,526.40. Massachusetts will receive the money in a lump sum almost immediately. Local governments will receive half the money this May and the second half next year. States have broad flexibility and discretion to use the funds within specified categories of eligible use.
- Public Health- by funding COVID-19 mitigation efforts, medical expenses, behavioral healthcare, and certain public health and safety staff
- Address Negative Economic Impacts- including economic harms to workers, households, small businesses, impacted industries, and the public sector
- Delivering assistance to workers and families, including aid to unemployed workers and job training, as well as aid to households facing food, housing, or other financial insecurity. In addition, these funds can support survivor’s benefits for family members of COVID-19 victims.
- Supporting small businesses, helping them address financial challenges caused by the pandemic and making investments in COVID-19 prevention and mitigation tactics, and providing technical assistance. To achieve these goals, recipients may employ this funding to execute a broad array of loan, grant, in-kind assistance, and counseling programs to enable small businesses to rebound from the downturn.
- Speeding the recovery of the tourism, travel, and hospitality sectors, supporting industries that were particularly hard-hit by the COVID-19 emergency and are just now beginning to mend. Similarly impacted sectors within a local area are also eligible for support.
- Rebuilding public sector capacity, by rehiring public sector staff and replenishing unemployment insurance (UI) trust funds, in each case up to pre-pandemic levels. Recipients may also use this funding to build their internal capacity to successfully implement economic relief programs, with investments in data analysis, targeted outreach, technology infrastructure, and impact evaluations.
- Replace Lost Public Sector Revenue-using this funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic
- Premium Pay for Essential Workers- offering additional support to those who have borne and will bear the greatest health risks because of their service in critical infrastructure sectors; and,
- Water, Sewer, and Broadband infrastructure- making necessary investments to improve access to clean drinking water, support vital wastewater and stormwater infrastructure, and expand access to broadband internet.
States cannot use the money to offset operating expenses and then cut taxes. If a state does cut taxes, it will have to demonstrate to the Treasury Department that it offset that lost revenue with spending cuts or another source of revenue that does not include the fiscal recovery funds. The treasury reserves to right to claw back money it deems improperly spent. States can also not deposit ARPA dollars into pension funds or rainy-day funds. More information is available on the Treasury’s Website.