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Treasury-Backed “Fiscal Recovery Funds” Present Unique Funding Opportunities to State and Local Governments

American Rescue Plan Act of 2021

As part of President Biden’s American Rescue Plan Act (ARPA) that was passed in March 2021, Congress assigned $1.9 trillion in federal funds for “COVID-related relief”. $350 billion of these funds were allocated to the Coronavirus State and Local Fiscal Recovery Funds.

These fiscal recovery funds are intended to provide support to state, local, and Tribal governments while they manage pandemic-induced hits to key services and infrastructures. Funds are still being allocated and will continue to be disbursed into 2022, and governments who have not already applied for a share of the funding should see whether they are eligible.

How can the recovery funds be used?

The Treasury gives governments flexibility in how they use recovery funds. Federal funds must simply be used to cover COVID-19 response, mitigation, or prevention activities. In a recent release by the Treasury, the following five expense categories were recognized as appropriate uses of government funding:

  1. Supporting public health expenditures
  2. Addressing negative economic impacts of COVID-19
  3. Replacing lost public sector revenues
  4. Providing premium pay for essential workers
  5. Investing in water, sewer, and broadband infrastructure

This means that all the following costs could potentially be covered.

  • Erecting mass vaccination sites
  • Replacing lost revenues of educators, firefighters, and public works employees
  • Upgrading or improving water, sewer, internet, and other key infrastructures
  • Supplementing the costs of at-home testing kits for people facing transportation barriers
  • Opening a mental health crisis hotline
  • Personal protective equipment (PPE)
  • Offering relocation bonuses or premium pay to frontline workers
  • Training workers living in low-income areas to serve in frontline positions
  • Contract tracing services
  • Enhancing public health information systems
  • Expanding high-quality childcare services
  • Improving public communications
  • Expanding ICU capacity
  • Creating or expanding violence prevention programs
  • Housing vouchers and providing housing navigation assistance

The two categories of expenses that Congress explicitly stated would not be covered are the costs to (1) fund a pension program, or (2) offset a reduction in tax revenue due to a new law or regulation. Otherwise, the sky is [very nearly] the limit.

How have the fiscal recovery funds been used thus far?

In the real world, the recovery funds have already been put to good use. Here are just a few creative ways the ARPA recovery funds have been used in 2021:

  1. Martinsville, Indiana is using $20.2 million of ARPA recovery funds to build a new levee (and replace the city’s existing levee) in an effort to prevent stormwaters from restricting road access to surrounding communities.
  2. Cabarrus County, North Carolina is directing $5 million of ARPA recovery funds to help small businesses cover key operating costs like payroll, utilities, mortgage, and rent.
  3. Vista City, California is directing $3 million of ARPA recovery funds to fund its small business grant program, allocating additional grants to businesses owned by women, minorities, veterans, and other underserved groups.

When must funds be used?

In general, fiscal recovery funds should only cover costs incurred between March 3, 2021 and December 31, 2024. However, governments that provide assistance to households, businesses, and individuals may be able to offset costs incurred prior to March 3, 2021. More details can be found in the Treasury’s Compliance and Reporting Guidance.

Regardless of when costs were incurred, all funds must be used by December 31, 2026.

What are the compliance requirements?

Recipients must file three categories of reports with the Treasury to use the ARPA’s fiscal recover funds:

Interim Report
This one-time report outlines how the government plans to use the funding.

Project and Expenditure Report
This quarterly report is due 30 days after the end of each quarter. It reports not only how funds have been used, but also how large governments have allocated subawards to smaller governments they help fund (like nonentitlement units).

Recovery Plan Performance Report
This annual report must only be filed by large governments: states, territories, metropolitan cities, and counties with populations with 250,000+ residents. This report provides a big-picture overview of how funds are being used and where they have been allocated. This report should identify key performance indicators so the Treasury can track the government’s performance.

The Treasury provides more detailed information about compliance reports in their Compliance and Reporting Guidance.

How should one request funding?

States, territories, metropolitan cities, counties, and Tribal governments can request funding directly from the Treasury, but smaller local governments and non-entitlement must request funding through their state government.

Is this different from the Coronavirus Relief Fund?


The Coronavirus Relief Fund was established under the CARES Act. Similar to the ARPA Coronavirus State and Local Fiscal Recovery Funds, the Coronavirus Relief Fund supports governments recovering from the coronavirus public health crisis. However, the CARES Act Coronavirus Relief Fund is more limited; these funds will only cover “necessary expenditures” that were incurred due to COVID-19. The ARPA Coronavirus State and Local Fiscal Recovery Funds cover COVID-19 response, mitigation, and prevention activities, making these funds much easier to qualify for.

What other funding options are out there?

The Coronavirus State and Local Fiscal Recovery Funds are a great funding option for any state, local, or Territorial government, but there are a few other funding options available to governments who operate healthcare facilities.

  • The Provider Relief Fund was established under the CARES Act. It gives healthcare providers direct payments to cover pandemic-induced lost revenues or increased expenses.
  • The ARPA set aside $8.5 billion in resources for providers who serve rural Medicaid, CHIP, or Medicaid patients. This funding will be disbursed along with Phase 4 of Provider Relief Fund payments.
  • The COVID-19 Coverage Assistance Fund reimburses healthcare providers who administer vaccines to patients who are uninsured.

Typically, institutions cannot submit expenses to more than one program, so governments should work with their CPAs and trusted advisors to determine which funding program is best. If you want to talk to our LaPorte professionals about the Coronavirus State and Local Fiscal Recovery Funds or any other federally funded COVID-19 support program, contact us today.