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Housing & Rental Assistance

Are the costs of a universal basic income program an eligible use of ARP funding?

Assuming that “universal basic income” (“UBI”) is defined as a government program in which every adult citizen receives a set amount of money from the government without a means test on a regular basis, a municipality’s implementation of such a program will most likely not be considered an eligible use of funds obtained from the American Rescue Plan Act of 2021 (“ARP”). Neither the statute nor the U.S. Department of the Treasury’s (“Treasury”) Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) Final Rule includes UBI as an eligible use.

There are four eligible use categories of CSLFRF funds:

  1. Responding to the public health and negative economic impacts of the pandemic
  2. Providing premium pay to essential workers
  3. Providing government services to the extent of revenue loss due to the pandemic, and
  4. Making necessary investments in water, sewer, or broadband infrastructure.[1]

UBI payments to all citizens would not be eligible as a public health response to the pandemic. Nor would UBI payments be authorized as a form of premium pay to essential workers or as an investment in water, sewer, or broadband infrastructure. In addition, there is no indication in the ARP or the Final Rule that Treasury would consider UBI payments to be eligible as a government service. Therefore, depending on one’s definition of UBI, it is not clear whether Treasury would consider a recipient’s implementation of such a program to be an eligible use of CSLFRF funds.

The Final Rule describes eligible uses of CSLFRF assistance without addressing the concept of UBI.[2] The Final Rule notes:

A program, service, or capital expenditure responds to a harm or impact experienced by an identified beneficiary or class of beneficiaries if it is reasonably designed to benefit the beneficiary or class of beneficiaries that experienced the harm or impact and is related and reasonably proportional to the extent and type of harm or impact experienced.[3]

It is not clear from Treasury’s guidance whether the agency would consider UBI payments to all citizens to be “reasonably proportional” to the harm or impact caused by the pandemic.

It is noteworthy that the Final Rule authorizes the payment of “cash assistance” to households that have been impacted by the pandemic. The Final Rule states that eligible CSLFRF assistance includes:

Assistance to households and individuals, including: (1) Assistance for food; emergency housing needs; burials, home repairs, or weatherization; internet access or digital literacy; cash assistance; and assistance accessing public benefits.[4]

The Supplementary Information discussion which accompanies the Final Rule discusses the provision of cash assistance and states in pertinent part:

The interim final rule included as an enumerated eligible use cash assistance and provided that cash transfers must be “reasonably proportional” to the negative economic impact they address and may not be “grossly in excess of the amount needed to address” the impact. In assessing whether a transfer is reasonably proportional, recipients may “consider and take guidance from the per person amounts previously provided by the Federal Government in response to the COVID-19 crisis,” and transfers “grossly in excess of such amounts” are not eligible…. Cash transfers, like all eligible uses in this category, must respond to the negative economic impacts of the pandemic on a household or class of households….recipients may presume that low- and moderate-income households…as well as households that experienced unemployment, food insecurity, or housing insecurity, experienced a negative economic impact due to the pandemic. Recipients may also identify other households or classes of households that experienced a negative economic impact of the pandemic and provide cash assistance that is reasonably proportional to, and not grossly in excess of, the amount needed to address the negative economic impact…. Treasury has reiterated in the final rule that responses to negative economic impacts should be reasonably proportional to the impact that they are intended to address. Uses that bear no relation or are grossly disproportionate to the type or extent of harm experienced would not be eligible uses.[5]

In addition to these provisions in the Final Rule and the Supplementary Information discussion, Treasury has published Frequently Asked Questions (“FAQs”) on CSLFRF assistance. FAQ #2.5, pertaining to the types of services eligible as responses to the negative economic impacts of the pandemic, states:

Eligible uses in this category include assistance to households…. Assistance to households includes, but is not limited to: food assistance; rent, mortgage, or utility assistance; counseling and legal aid to prevent eviction or homelessness; cash assistance; emergency assistance for burials, home repairs, weatherization, or other needs.[6]

While this answer to FAQ #2.5 explicitly refers to the use of CSLFRF assistance to provide cash assistance to households, in the context of the other listed types of assistance to households, it appears that Treasury considers the reference to cash assistance to mean short-term assistance, rather than longer-term UBI funding that might be provided irrespective of the pandemic’s impact on the beneficiaries of such assistance and irrespective of any means testing.

Notably, the Final Rule highlights specific eligible services to support low-income areas that have been unduly impacted by the pandemic by:

  • Establishing definitions of essential workers eligible for premium pay;[7]
  • Encouraging Fiscal Recovery Funds recipients to serve workers based on financial need;[8]
  • Providing that recipients may use Fiscal Recovery Funds to restore (to pre-pandemic levels) state and local workforces where women and people of color are disproportionately represented; and[9]
  • Targeting investments in broadband infrastructure to unserved and underserved areas.[10]

Treasury has also provided a succinct overview of the Final Rule, which outlines additional enumerated eligible uses regarding assisting impacted households. This can be found on page 18 of the Final Rule Overview document.[11] Furthermore, Treasury has outlined other enumerated eligible uses for disproportionately impacted households on page 20 of the Final Rule Overview document.[12]

For quick reference in determining low and moderate-income ("LMI") households regarding the differentiation of impacted and disproportionately impacted households to determine eligible uses of funds under the Final Rule, reference Treasury's provided Tool for Determining LMI Households.[13]

However, neither the statute nor any other Treasury guidance explicitly discusses the concept of using CSLFRF assistance to fund UBI programs. Therefore, the answer to this question depends on the specific criteria that a recipient might use to structure a possible UBI program which is reasonably proportional to the impact of the pandemic on UBI beneficiaries.

It should be noted that additional information may be provided when Treasury issues new FAQs specific to the Final Rule, as indicated in the interim Final Rule FAQ.[14] In addition, Treasury encourages municipalities to consider the guidance issued in the Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule.[15]

Last updated: March 7, 2022

[1] Treas. Reg. 31 CFR 35 at 8, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[2] Id., at 414-431.

[3] Id., at 415 (emphasis added).

[4] Id., at 418 (emphasis added).

[5] Id., at 90-91 (emphasis added).

[6] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of January 2022) – FAQ #2.5, at 5-6 (emphasis added), available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[7] Treas. Reg. 31 CFR 35 at 221, available at: https://home.treasury.gov/system/files/136/SLFRF-Final-Rule.pdf.

[8] Id., at 116.

[9] Id., at 178.

[10] Id., at 294.

[11] Department of Treasury, Coronavirus State & Local Fiscal Recovery Funds: Overview of the Final Rule, (as of January 2022), at 18, available at: *SLFRF-Final-Rule-Overview.pdf (treasury.gov).

[12] Id., at 20.

[13] Department of Treasury, Tool for Determining Low and Moderate Income (LMI) Households, available at: SLFRF-LMI-tool.xlsx (live.com).

[14] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of January 2022), at 1, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.

[15] U.S. Department of the Treasury, Statement Regarding Compliance with the Coronavirus State and Local Fiscal Recovery Funds Interim Final Rule and Final Rule, available at: https://home.treasury.gov/system/files/136/SLFRF-Compliance-Statement.pdf.