To reduce administrative burden, Treasury’s final rule for the coronavirus state & local fiscal recovery fund includes a $10 million standard allowance for the revenue loss provision

By: Emily Makings
8:55 am
January 11, 2022

The U.S. Department of the Treasury has released the final rule for the coronavirus state & local fiscal recovery funds (SLFRF). (An overview is available here.)

The SLFRF is $350 billion in federal relief that was appropriated as part of the American Rescue Plan Act. This is a fairly flexible pot of relief money. It may be used generally on purposes in response to the pandemic or its economic impacts. Additionally, it may be used to replace lost revenue. Funds used to backfill revenue losses may then be spent broadly on any government services (including school construction, roads, public safety, etc.).

The state of Washington received $4.428 billion (and has more than $1.2 billion left to spend). Counties in Washington received $1.479 billion and cities in Washington received $1.213 billion. (However, at least one city—Brier—refused the funds.) To this point, states and local governments have been appropriating their shares of the funds based on the guidance in the interim rule.

A major change from the interim to the final rule is that now there is a standard allowance for revenue loss of $10 million. The method for calculating the level of revenue loss that could be backfilled by the SLFRF is complicated. But now a locality can skip the calculation and just use up to $10 million to replace revenue—regardless of whether any revenue was actually lost. This provision will help to alleviate the administrative burden of using the SLFRF, especially for small jurisdictions. It means that the 257 cities and 18 counties in Washington that received $10 million or less from the fund could claim their entire allocation to backfill revenue loss and essentially just use it to fund their regular spending.

Another change in the final rule is that governments may use the SLFRF for capital spending on schools and hospitals. They may also use it to make contributions to unemployment insurance trust funds.

We have been following the federal relief money: Here is a spreadsheet showing all relief funds flowing to Washington (so far), including the SLFRF amounts to each jurisdiction. This spreadsheet shows how the state has used the SLFRF and other federal relief. I wrote about how Gov. Inslee’s 2022 budget proposals would use the state’s remaining SLFRF funds here and here.

Categories: Budget , Economy.
Tags: ARP Act , COVID-19