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What is the American Rescue Plan? What It Means for Local Government

By GovPilot
 

As the United States distributes vaccinations nationwide and sees an ongoing decline in national unemployment rates, the Federal Government hopes to further improve on the COVID-19 situation via a new emergency legislative package, the American Rescue Plan. 

The White House signed the bill into law on March 11, 2021 with the goal to, "fund vaccinations, provide immediate, direct relief to families bearing the brunt of the COVID-19 crisis, and support struggling communities."

With that message in mind as the United States Congress moved forward on approving the bill, state governments, local municipalities, and ordinary Americans will receive stimulus money in the immediate future. 

But as a local government official, how much will you and your local community be receiving? It can be confusing to know what’s next when the Federal government approves a multi-faceted piece of legislation.

The American Rescue Plan differs from the previous economic stimulus bill in that it allows Federal relief funds to be sent directly to state and local governments of all sizes. It was written to allow local governments broad use of relief funding, but it does place some restrictions on how the money can be spent. Learn more about how the recently approved stimulus bill will benefit your local and state government.

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What is the American Rescue Plan?

The American Rescue Plan Act (ARPA) of 2021 is the United States’ $1.9 trillion stimulus package. After being approved by both the House and the Senate, President Biden signed the Bill into law on March 11, 2021.

The main goal in passing the legislation was to help the United States recover from losses caused by the COVID-19 public health emergency. The economic stimulus package includes $1,400 checks for millions of Americans, close to $35 billion in grants for small businesses, and over $350 billion for state and local governments. State and local relief funds can be used to provide government services like IT technology solutions or fill gaps in state or local budgets, but cannot be used to pay down pension funds, offset tax cuts, or contribute to rainy day funds. 

The American Rescue Plan language in terms of specific allowable expenditures (such as IT upgrades or digitization of services) is far less concrete than the CARES Act was. In fact, the ARPA states that it is leaving local governments to spend as best they see fit, stipulating only that local governments CANNOT use funds for two specific purposes:

  • Offsetting a reduction in net tax revenue resulting from a change in law, regulation, or administrative interpretation - Section 602(c)(2)(A)
  • Deposit into a pension fund(s) - Sections 602(c)(2)(B) and 603(c)(2)
  • Applying as matching funds toward other federal grants
  • Paying interest or principal on outstanding debt, or for consent decrees/legal settlements
  • Contributing to rainy day funds

According to page eight (8) of the American Rescue Plan Fiscal Recovery Funds Interim Rule, "Within the eligible use categories outlined in the Fiscal Recovery Funds provisions of ARPA, State, local, and Tribal governments have flexibility to determine how best to use payments from the Fiscal Recovery Funds to meet the needs of their communities and populations."

Why is the American Rescue Plan Important for State and Local Governments?

The American Rescue Plan included $350 billion in Federal relief funding for state governments and local municipalities a massive $200 billion uptick from the amount provided from the CARES Act. Additionally, the restrictions on how the money can be used at the state and local level have lowered substantially in comparison to the previous stimulus package.

Critically, the American Rescue Plan provides a longer timeline than the CARES Act did within which local governments are able to spend funds. The deadline to spend American Rescue Plan funds is December 31, 2024.

A recent report from the Brookings Institution noted that the ARPA, "represents an opportunity for state and local officials to 'invest' in their communities rather than simply 'spend' their significant allotments. The authors stressed that the act’s $350 billion for “Coronavirus State and Local Fiscal Recovery Funds” gives governments a chance to move beyond relief, and seed a new trajectory by deploying the money “smartly and equitably.”

The report details another observation: The investment opportunity is magnified by the fact that the funding for state and local governments appears to be incredibly flexible, and therefore even more supportive of innovative recovery solutions."

Here are some of the ways the stimulus money can be used by state and local governments:

  • Prevent layoffs - Joe Biden noted that the stimulus package will give communities, “the money they need to prevent massive layoffs for essential workers.” Helping important employees to maintain their jobs will help to keep America on the mend after hitting record levels of unemployment in 2020. 
  • Address the public health emergency - the stimulus bill text allows funds to be spent to, “respond to or mitigate the public health emergency...cover costs incurred as a result of such emergency… [and] address the economic impacts of such emergency.” This can include providing safe services and operations to employees and constituents through remote work, including the technology that enables it. 
  • Meet fiscal obligations - Leadership in cities around the nation stressed the difficulty in meeting financial obligations for the foreseeable future. With a $90 billion budget shortfall, the stimulus money will help to alleviate job losses in important sectors like education and transportation. It will also ensure that vaccination and testing efforts remain strong. 
  • Improve technology and IT infrastructure - Additional money for local and state municipalities means that governments can improve their IT infrastructure with modern cloud technology. Investing in technology will allow state and local governments to improve civic engagement, collect valuable data, work remotely, and get work done more efficiently for years to come. 
  • Improve communication across communities - using funds to provide your community with platforms for reporting concerns and digital form filing will improve the quality of life of local citizens. It will also allow for government officials to access important documentation and contact one another from the cloud, improving efficiency for government workers. 

Per the Brookings Institute, "Overall, the Treasury Department’s interim final rule provides useful direction as to how recipient governments should prioritize deploying the significant resources available through the State and Local Fiscal Recovery Funds. They retain ample room for creativity and the ability to address a variety of specific local needs. Importantly, the more those needs reflect the direct and disproportionate impacts of the pandemic—especially on vulnerable populations and places—the greater discretion state, local, and tribal leaders will enjoy."

What Does Your Town or Municipality Need to Do To Receive the Stimulus Money?

The American Rescue Plan (Section 9901: Coronavirus State and Local Fiscal Recovery Funds) instructed the U.S. Treasury to send the funds to metropolitan cities within 60 days and to smaller, less populated cities and towns within 90 days of the bill being signed into law. Since the Bill was signed by President Joe Biden on March 11, 2021, metropolitan cities can expect their federal stimulus money by May 10, 2021. Smaller towns and cities can expect their funds by June 9, 2021. 

In the meantime, now is the time to consider how your local or state government would like to use the funds in the future. What issues seem to be top priorities with your constituents? How outdated is your current infrastructure? What technological updates would be better for government workers and their constituents for years to come? 

Considering questions like these will allow you to quickly take action once the stimulus money is distributed to your city or town. Keep in mind that the federal government will be able to provide guidance and support as you plan your course of action. 

Luckily, since these grants are not competitive, state and local government officials do not need to fill out an application or provide details on how the money will be allocated.

How Much Stimulus Money Will Your Local Government Be Receiving?

The amount of money each town or city is receiving is dependent on the size of the community. Of the total $61.5 Billion set aside for local governments, $45.57 billion is going to cities with 50,000+ community members, with the remaining $19.53 billion going to towns and cities with less than 50,000 constituents. Keep in mind, the total amount of the grant for small towns and cities will be capped at 75% of the communities budget prior to the global pandemic.

How Can Stimulus Money Impact the Future of Local Government? 

Shifts in how people are able to work have made challenges like filing permits and licenses, reporting concerns, and emergency management even more difficult. Like businesses, the government has been forced to innovate like never before as a result of the pandemic. 

Luckily, these innovations mean that our lives are set to improve in many ways. With the $350 billion for local and state governments included in the American Rescue Plan, local officials now have the means to further improve the technology used in their municipalities and counties.

Here are some of the ways that Federal funding can allow for technology upgrades in your community: 

1. Online filing for permits, loans, and other applications  

Stimulus money can be used to set-up geographic information systems and digital form modules so that individuals and businesses within a designated jurisdiction can file permits, loans, and applications via the Internet. Moving these processes online with permitting software expedites the process and drastically improves efficiency. Enable local businesses to easily apply for health inspections like restaurant safety, and sidewalk dining permitting. 

In Trenton, New Jersey, small businesses were facing massive economic burdens as a result of the pandemic. Moving their business loan applications to a digital format allowed local businesses to receive emergency funding from the city through the CARES Act much more quickly, and provided the local municipality with insightful data to use in building a roadmap for the future.

2. Provide citizens with report-a-concern technology

At a time when citizens need to interact with their local and state governments more than ever,  the massive shifts in work culture have made it more difficult to report important information to local government officials. Luckily, public complaint management software provides local citizens with an application on their mobile phones to report non-emergency concerns such as code violations, potholes, and damaged infrastructure.

Report-a-concern technology allows the local government to encourage civic engagement, receive and resolve important complaints and concerns in a timely manner, look for patterns in the data, and effectively work from a remote location. 

3. Let government workers work remotely and efficiently

Many local and state governments struggled with efficiency before the pandemic even occurred. With the sudden shift to remote work, the lack of efficiency and productivity worsened. Now, local governments have the funds to use cloud-based technology to alleviate these struggles and ensure business continuity. 

The town of Jackson, NJ completed a digital transformation amid the pandemic. After quickly onboarding local employees to government software, digital forms and processes have saved their clerks department 40 hours a month worth of time and given them the capability to work from a fully-remote capacity. 

Overall, the American Rescue Plan is a massive opportunity for local governments to not only bounce back from COVID-19, but to update existing information technology infrastructure to improve American communities for decades to come.

If you are interested in learning more about cloud-based local government software, book a consultation with one of our solutions specialists. 

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American Rescue Plan FAQs

1. American Rescue Plan vs CAREs Act: What’s the Difference?

The American Rescue Plan is an emergency legislative package signed by President Joe Biden in March 2021. The stimulus package provided $1.9 trillion in stimulus relief funds, with $1,400 checks going out to many Americans and $350 billion provided to state and local governments.

The CARES Act was the first COVID-relief bill signed by former President Donald Trump in 2020. It provided $2.2 trillion in stimulus funds but provided significantly less funding to state and local governments than the American Rescue Plan.

The American Rescue Plan language in terms of specific allowable expenditures (such as IT upgrades, or digitalization of government services) is far less concrete than the CARES Act was. In fact, the ARP states that it is leaving local governments to spend as best they see fit, stipulating only that local governments CANNOT use funds for two specific purposes:

  • Offsetting a reduction in net tax revenue resulting from a change in law, regulation, or administrative interpretation - Section 602(c)(2)(A)
  • Deposit into a pension fund(s) - Sections 602(c)(2)(B) and 603(c)(2)

2. What Does the American Rescue Plan Include?

The American Rescue Plan includes economic relief for the American people, businesses, and state and local governments. 

It will provide state and local relief for assistance in COVID-19 vaccination and testing distribution, funding for communities of all sizes, and funding for education. Unlike the CARES Act, which only sent funds to governments with populations of 500,000 or more, the 2021 ARP provides governments of all sizes with Federal funds.

3. Has the American Rescue Plan Act of 2021 Been Passed?

The $1.9 trillion coronavirus stimulus bill has passed Congress and was signed by President Joe Biden. It was signed into law on March 11, 2021.

4. How Will the American Rescue Plan Impact State and Local Governments?

Both local and state governments are receiving more funding in the ARP with less restrictions than the CARES Act. 

The funds can legally be used to innovate and improve on existing IT infrastructure. Using cloud-based technology, municipalities and states can move paper based processes and single-use software as on-site server programs to cloud-based digital modules, have government employees and officials work remotely, and provide community members with report-a-concern software, and more.

5. Is there a Deadline That Local Government Stimulus Money Must Be Spent By?

Listed below are the general guidelines for the U.S. Department of Treasury’s program administration of the State and Local Coronavirus Fiscal Recovery Fund.

  • The deadline to spend funds is December 31, 2024.
  • The U.S. Treasury is required to pay the first tranche to counties not later than 60-days after enactment, and second payment no earlier than 12 months after the first payment.
  • The law provides an additional $77 million for the Government Accountability Office and $40 million for the Pandemic Response and Accountability Committee for oversight and to promote transparency and accountability.

Tags: Government Efficiency, Digital Transformation, Blog, CARES Act, American Rescue Plan