NLC tracks dwindling ARPA funds

As the deadline to obligate federal relief money draws steadily closer, it appears the process of municipalities doing so is moving at a slow pace.

The National League of Cities is providing updated data on how and where municipalities are obligating and spending $350 billion worth of American Rescue Plan funds as rules remain unclear and deadlines loom. Recipients must obligate the funds by Dec. 31, 2024 and spend them by Dec. 31, 2026.

NLC has teamed up with Brookings Metro and the National Association of Counties to develop an online tool that crunches quarterly updates from the Treasury Department to track where and how State and Local Fiscal Recovery Funds are being allocated and spent. The tracker focuses on large cities and counties with populations of at least 250,000.

Over three hundred local governments and 12,000 projects are represented on the dashboard. Over $50 billion has been tracked with 79.5% budgeted as of Aug. 16. The appropriation and spending levels remain steady.

“There was no more than a two-percentage point change in ARPA commitments in the investment categories we track between the April 2023 data and the January 2023 data,” said Julia Bauer, program manager research and data analysis, NLC.

As the deadlines for obligating and spending draws nearer some municipalities continue to struggle with rules that lack clarity. In June municipalities sought help via a letter sent to the Treasury and the Office of Management and Budget requesting the expedition of guidelines about the Interim Final Rule.

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Most of the money is funding government operation investments with cities budgeting the funds faster than counties. Obligating is also outpacing the spending. Per NLC, “In total, large cities and counties committed $51 billion or 80% of their SLFRF dollars by the end of March and had spent $25 billion. An additional $8.6 billion of appropriations had been obligated to specific projects and contracts but had not yet been spent.”

According to recent figures, over 39% of the money is fueling government operations, over 11% is going to infrastructure projects and public health efforts respectively. Community aid and housing account for over 10% each. Public safety and workforce development both clock in at over 8%.

As the deadlines for obligating and spending draws nearer some municipalities continue to struggle with rules that lack clarity. In June, the municipalities sought help via a letter sent to the Treasury and the Office of Management and Budget by several senators requesting the expedition of guidelines about the Interim Final Rule.

The municipalities are looking for additional guidance on rules that added flexibility to allocating SLFRF towards natural disaster relief, critical infrastructure projects, and economic development.

Per the letter, “The additional eligible uses of these funds will build on the original purpose of SLFRF, and we ask that Treasury and OMB provide clarity on the timeline for the release of comprehensive guidance necessary for our communities to implement these changes.”

The letter came from a bipartisan group of senators and notes that “SLFRF recipients have been in a holding pattern since the passage of the Consolidated Appropriations Act of 2023, the $1.7 trillion omnibus bill that passed at the end of 2022.

Some states, including Ohio have gone to court over plans that would allow them to use ARPA money to fund tax cuts. Ohio’s effort was joined by a coalition of nine states and two think-tanks that filed amicus briefs urging the Supreme Court to take up Ohio’s challenge.

The influx of relief funds has been stuffing some state budget with surpluses while also causing concerns about what happens when the obligation and spending deadlines finally arrive.