American Rescue Plan Act Enacted; Legislation Expected to Provide Significant Resources to Virginia Counties

The American Rescue Plan Act received final approval in Congress on March 10 and was signed into law by President Biden on March 11. The $1.9 trillion relief package is wide-ranging, touching on policy areas from vaccination to broadband in its comprehensive approach to COVID-19 response and recovery. VACo appreciates the direct, flexible assistance to counties contained in the legislation; VACo had advocated for such assistance as an important element of Virginia’s recovery from the COVID-19 pandemic, and is grateful to Virginia’s Senators and members of Congress for their work in securing these important resources. VACo also extends its appreciation to its members for their advocacy efforts.

VACo’s initial analysis is below. VACo understands that Treasury will be providing guidance on the implementation of the statutory language; NACo solicited comments and questions this week in preparation for discussions with the Biden Administration about implementation of the Act and VACo thanks members who submitted information via NACo’s website. VACo will be in close contact with NACo and its sister organizations and will share additional information as it is received.

Coronavirus State and Local Fiscal Recovery Fund

County Assistance
The direct local assistance is contained in the new Coronavirus State and Local Fiscal Recovery Fund, which will provide $65.1 billion in direct aid to counties of all sizes (a departure from the approach contained in the Coronavirus Relief Fund in last year’s CARES Act, which provided direct distributions only to counties meeting certain population thresholds, with smaller counties reliant on distributions from state governments). These allocations will be based on population and will be distributed in two tranches, with the first payment to be issued within 60 days of enactment of the legislation (to the extent practicable), and the second distribution made no earlier than 12 months from the first distribution.

Based on preliminary estimates developed by the House Oversight and Government Reform Committee, Virginia counties can expect to receive approximately $1.2 billion in these funds.

Cities and Towns
In addition to the county distributions, the ARPA includes $65.1 billion for cities and non-county municipalities. Metropolitan cities (generally, cities with a population of 50,000 or more) will receive distributions directly from the federal government from an overall allocation of $45.6 billion, based on the same timeline as the county distributions and subject to the same limitations on use of funds. Funds are distributed based on a modification to the Community Development Block Grant formula (which measures relative population, poverty, and housing overcrowding as well as lagging growth and age of housing). (Urban counties that receive CDBG funding will receive the larger of their allocation under the CDBG formula or their share of the population-based county allocation.) Non-county municipalities that do not receive Community Development Block Grant funding will receive distributions through the states from an allocation of $19.5 billion, based on population, with individual payments not to exceed 75 percent of the most recent budget for the locality as of January 27, 2020; states are required to distribute their funds no later than 30 days after receiving them, but may request an extension.

Allowable Uses of Funds
The legislation stipulates four eligible categories of uses for the funds:

• Responding to the COVID-19 public health emergency or its negative economic impacts, including the provision of assistance to households, small businesses, and nonprofits, or to affected industries such as tourism, travel, and hospitality.
• Providing premium pay (as defined in the bill, a maximum of an additional $13 per hour, not to exceed $25,000 with respect to any single worker) to essential workers of the local government or via grants to employers of essential workers.
• Providing government services to the extent of revenue reductions due to the public health emergency (relative to revenues collected in the most recent full fiscal year prior to the emergency).
• Making necessary investments in water, sewer, or broadband infrastructure.

Local governments may not use these funds for a deposit into any pension fund, and funds must be used to cover costs incurred by December 31, 2024.

States
States, territories, and tribal governments will receive separate distributions from an overall appropriation of $219.8 billion, of which $195.3 billion will be distributed to states and the District of Columbia. $25.5 billion will be distributed equally among the states and the District of Columbia. The remainder of the funds will be distributed based on each state’s proportion of unemployed individuals over the three-month period ending with December 2020. States are to receive their funds directly from the Treasury within 60 days after enactment of the bill; the Secretary of the Treasury has the authority to split payments and withhold up to 50 percent for a period of up to 12 months. The list of eligible uses of funds is the same for the states as for local governments, but an additional restriction is imposed on states, barring them from using the funds to either directly or indirectly offset a reduction in net tax revenue resulting from a change in law, regulation, or administrative interpretation.

Coronavirus Capital Projects Fund
The Act provides an additional $10 billion to states, territories, and tribal governments for capital projects directly enabling work, education, and health monitoring, including remote options, in response to the pandemic. Each state will receive a minimum of $100 million. After distributions to territories and tribal governments, the remainder will be distributed based on population (50 percent), proportion of individuals living in rural areas (25 percent), and proportion of individuals with a household income below 150 percent of the federal poverty line (25 percent).

Local Assistance and Tribal Consistency Fund
The Act also provides $2 billion (available until September 30, 2023) for payments to eligible revenue sharing counties and eligible tribal governments. $750 million will be available for these counties, to be distributed in amounts determined by the Secretary of the Treasury, based on certain economic indicators. Funds may be used for any governmental purpose other than lobbying. Eligible revenue sharing counties experience negative revenue impacts due to implementation of a federal program or changes to such program, as determined by the Secretary.

Other Provisions of Interest to Local Governments

K-12 Assistance

• Provides approximately $123 billion for K-12 schools, of which $800 million is to be used to assist homeless children and youth.
  • The remainder is to be provided as grants to states based on Title I allocations. Funds are available through September 30, 2023.
  • Each state must allocate at least 90 percent of grant funds to local educational agencies, based on Title I allocations. These suballocations are to be made within 60 days of the state’s receipt of funds.
  • Local educational agencies are to reserve at least 20 percent of these funds to address learning loss through the implementation of evidence-based interventions, such as summer learning or after school programs.
  • The remaining funds may be used by local school divisions for a long list of purposes, including school facility repairs and improvements to reduce the risk of virus transmission and projects to improve indoor air quality.
  • From the state’s share of these funds, at least 5 percent must be used for activities to address learning loss; at least 1 percent must be used for evidence-based summer enrichment programs; and at least 1 percent must be used for evidence-based after school programs.
  • A local educational agency receiving funds must make available on its website its plan for the safe return to in-person instruction and continuity of services.
  • According to a recent press release from the Governor, Virginia school divisions are projected to receive an estimated $1.9 billion, with $200 million available for state K-12 initiatives.
• The bill also provides $2.6 billion in FY 2021 for Part B of the Individuals with Disabilities Education Act (which provides formula grants to states for the provision of a free and appropriate public education for children with disabilities ages three through 21).

Broadband

• Appropriates $7.2 billion, available until September 30, 2030, for a new Emergency Connectivity Fund to reimburse elementary and secondary schools and libraries for eligible equipment, which includes hotspots, routers, and modems, or advanced telecommunications and information services.

Paid Leave

• Extends payroll tax credits for employer-provided paid sick and family leave established under the Families First Coronavirus Response Act (these credits would offset employer costs for voluntarily-provided leave); adds receiving a vaccination, recovery from vaccine-related complications, and COVID-19 testing as additional elements of paid leave that would qualify for the tax credits.  Allows state and local governments to qualify for the payroll tax credits (which was disallowed under the Families First Coronavirus Response Act).  Applies to wages paid between April 1, 2021, and September 30, 2021.  Credits are not allowed if an employer discriminates in the availability of paid sick or family leave in favor of highly-compensated employees, full-time employees, or on the basis of tenure with an employer.

Nutrition

• Extends the 15 percent increase in Supplemental Nutrition Assistance Program (SNAP) benefits through September 30, 2021 (the December relief package provided this enhanced benefit through June 30).
• Provides $1.1 billion through September 30, 2023, for state administrative costs for the SNAP program.
• Authorizes states to extend the Pandemic Electronic Benefit Transfer program for 90 days in order to provide benefits during the summer following a school year in which there is a public health emergency designation. This program supplements SNAP benefits for low-income households during periods in which schools are not open for in-person instruction (children in these households would otherwise be receiving free or reduced-price school meals).

Child Care/Early Childhood

• Provides $200 million in FY 2021 for preschool grants under the IDEA to states for serving children ages three to five; provides $250 million in FY 2021 for IDEA part C, which serves infants and toddlers with disabilities.
• Provides $15 billion for the Child Care and Development Block Grant. Requires that states must obligate funds within FY 2021 and the next two fiscal years. Allows states to use the funds for child care assistance for health care workers and other essential workers without regard to income eligibility requirements. Requires funds to be used to supplement, not supplant, other federal, state, and local funds supporting child care.
• Provides an additional $24 billion for stabilization grants for eligible child care providers, to be available through September 30, 2021. Stipulates eligibility requirements for providers and eligible uses of the funds, including personnel, rent, PPE, sanitation, and mental health supports for children and employees. Funds may be used to reimburse providers for sums previously expended for goods or services required to respond to the public health emergency. Requires funds to be used to supplement, not supplant, other federal, state, and local funds supporting child care.
• Provides $1 billion for Head Start, to be allocated to Head Start agencies via one-time grants, with funds available through September 30, 2022.
• Permanently increases the annual funding level for the Child Care Entitlement to States from $2.9 billion per year to $3.6 billion per year and waives the state match for fiscal years 2021 and 2022.

Public Health

• Provides $7.5 billion for vaccinations, including supplemental grants to states to make up the difference between their allocations in the FY 2021 appropriations bill and what they would have received via formula funding for the Public Health Emergency Preparedness Grant.
• Provides $6.1 billion for research and development, manufacturing, production, and purchase of vaccines for COVID-19 or other potentially pandemic diseases.
• Provides $500 million for Food and Drug Administration review and approval of vaccines, therapeutics, diagnostics and oversight of supply chain.
• Provides $47.8 billion for testing and tracing for COVID-19. Directs the implementation of a national evidence-based strategy for testing, contact tracing, surveillance, and mitigation, including the provision of technical assistance to states and localities and support for the development, manufacturing, and distribution of tests.

Behavioral Health

• Provides $1.5 billion though FY 2025 for grants to states for community mental health services.
• Provides $1.5 billion through FY 2025 for grants to states for substance abuse prevention and treatment.
• Provides $30 million for grants to states, localities, nonprofits, or behavioral health organizations to support community-based overdose prevention and other harm reduction programs.
• Provides $50 million for grants to states, localities, nonprofits, or behavioral health organizations to address community behavioral health needs that have been worsened by the pandemic.
• Provides for a five-year state option to cover certain mobile crisis services under Medicaid; makes $15 million available for state planning grants.

Utility Assistance

• Provides $4.5 billion through September 30, 2022, for the Low-Income Home Energy Assistance Program.
• Provides $500 million for grants to states and tribal governments to assist low-income households that pay a high proportion of income for drinking water and wastewater; funds are to be provided to owners or operators of public water systems or treatment works to reduce arrearages and rates charged. Funds are available until expended and are to be allocated based on the percentage of households in the state or under the jurisdiction of the tribal government with income less than or equal to 150 percent of the federal poverty level and the percentage of households spending more than 30 percent of monthly income on housing.

Rental Assistance/Housing

• Provides $21.6 billion for emergency rental assistance. Funds are to be allocated to states and eligible localities (localities with populations greater than 200,000 are eligible to receive funding directly) to provide financial assistance to eligible households for a period not to exceed 18 months; funds may be used for rent, rental arrears, utilities and home energy costs and arrears. Ten percent of funds may be used for case management and other services to support stable housing, and 15 percent may be used for administrative costs. Funds unobligated as of October 1, 2022, may be used for other affordable housing and eviction prevention purposes. Sets out process for reallocating unused funds. Funds are available until September 30, 2025. The Act extends the deadline to expend rental assistance funding provided in the December 2020 relief package from December 31, 2021, until September 30, 2022.
• Provides $5 billion, available through September 30, 2030, for emergency housing vouchers.
• Provides $5 billion, available through September 30, 2025, for homelessness assistance and supportive services, including tenant-based rental assistance, development of affordable housing, supportive services to qualifying individuals, and acquisition of non-congregate shelter units.
• Creates the Homeowner Assistance Fund to provide $10 billion to states and tribal governments for mortgage payment assistance; help with costs related to delinquency or default; principal reduction; interest rate reductions; and assistance with utilities, internet, and insurance, among other eligible expenses. Funds may be used to reimburse previous expenditures by states, localities, or tribal governments between January 21, 2020, and the disbursement of the new allocations. Stipulates how funds are to be targeted by states and tribal governments. Funds are to be allocated based on a formula that considers unemployment and mortgages overdue or in foreclosure.

Transportation

• Provides $30.5 billion in assistance to public transit agencies, with funds available until September 30, 2024. Expenses dating back to January 20, 2020, are eligible and include payroll, operating costs to maintain service due to lost revenue, and administrative leave.
  • Of this overall allocation, $26.1 billion is for Federal Transit Administration Urbanized Areas Formula Grants; $50 million is for grants for enhanced mobility of seniors and individuals with disabilities; $317 million for rural area formula grants. $2.2 billion is also available for operating assistance for eligible entities that require additional assistance for costs related to operations, personnel, cleaning, and sanitization combating the spread of pathogens on transit systems, and debt service payments incurred to maintain operations and avoid layoffs and furloughs; funding applications will be evaluated by the Administrator of the Federal Transit Administration. Provides $1.7 billion for capital investment grants.
• Provides $8 billion available through FY 2024 through Airport Improvement Program (AIP) formulas at a 100 percent federal share, including:
  • $6.5 billion for primary and certain cargo airports and $100 million for general aviation and commercial service airports for operations, personnel and sanitation to combat the spread of COVID-19: $6.5.
  • $800 million for primary airport sponsors to meet rent and other obligations to airport concessionaires.
  • $608 million to cover the full federal share of these projects, including retroactively for FY 2020.

Economic Development

• Provides $3 billion for the Economic Development Administration, with funds available through September 30, 2022. 25 percent of this funding is to be used for assistance to states and communities that have suffered economic injury as a result of job and GDP losses in travel, tourism, or outdoor recreation.

Assistance to Businesses and Individuals

• Provides $7.25 billion in additional Paycheck Protection Program loan funding and expands eligibility to certain nonprofits.
• Provides $15 billion for Economic Injury Disaster Loans, to be available until expended, $10 billion of which is to be used for entities that did not receive the full amount of Targeted EIDL Advances for certain small businesses established under the December 2020 relief package, and $5 billion of which is for payments to certain very small businesses that have suffered significant economic losses.
• Funds $28.6 billion in Restaurant Revitalization Grants. Eligible recipients may use funds for specified costs such as payroll, mortgage payments, rent, utilities, maintenance, and sick leave.
• Provides an additional $1.25 billion for the grant program for shuttered venues that was established in the December relief package.
• Extends Pandemic Unemployment Assistance (which provides benefits to certain self-employed workers who do not qualify for regular state unemployment assistance) and Pandemic Emergency Unemployment Compensation (which provides additional weeks of benefits for individuals who have exhausted their state benefits) to September 6, 2021. Extends Federal Pandemic Unemployment Compensation (which provides a supplemental benefit of $300 per week) to September 6, 2021.
• Provides additional recovery rebate to individuals of $1400 per taxpayer, plus $1400 per dependent, with limitations based on adjusted gross income.

VACo Contacts: VACo Legislative Team