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COVID-19 Federal Assistance e311

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Lost Revenue & Revenue Replacement

Can ARP funds from revenue loss calculations serve as a match to other federal programs like traditional municipal dollars?

At this time, funds received as part of the American Rescue Plan Act of 2021 (“ARP”) from revenue loss calculations may not serve as a match to other federal programs like traditional municipal dollars.

The U.S. Department of the Treasury’s (“Treasury”) May 10, 2021, Interim Final Rule (the “Rule”) includes a comprehensive formula that municipalities should apply to calculate their respective revenue loss due to the pandemic.[1] Once a municipality has calculated its lost revenue, it generally has “broad latitude to use the Fiscal Recovery Funds for the provision of government service to the extent of reduction in revenue.”[2]

However, Treasury has issued clear guidance on forbidden uses of the ARP’s Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”), including an overarching restriction on using ARP funds allocated to municipalities for non-federal matching when barred by existing regulation or statute.[3] As an example, the Rule states that “payments from the [State and Local] Fiscal Recovery Funds may not be used to satisfy the State share of Medicaid.”[4]

Likewise, Treasury’s Frequently Asked Questions (“FAQ”) on CSLFRF address whether recipients of ARP funding may use funds to satisfy non-federal matching requirements broadly, as well as under the Stafford Act:

Fiscal Recovery Funds are subject to pre-existing limitations in other federal statutes and regulations and may not be used as non-federal match for other Federal programs whose statute or regulations bar the use of Federal funds to meet matching requirements. For example, expenses for the state share of Medicaid are not an eligible use.[5]

Municipalities who have received CSLFRF funding should keep abreast of ongoing developments and discussions regarding non-federal matching. Members of the U.S. Senate have expressed bipartisan support for the idea that CSLFRF recipients could use CSLFRF funds instead of their revenues to satisfy non-federal match requirements for federal discretionary grant programs they may contribute to and benefit from, such as: (i) U.S. Department of Agriculture’s (“USDA”) Water & Wastewater Disposal Grant Program, (ii) USDA’s Broadband ReConnect Program, (iii) U.S. Economic Development Administration’s  Public Works Program, or (iv) other similar federal programs.[6] CSLFRF recipients should be aware of uses that could potentially become eligible as the COVID-19 emergency continues to evolve over time and Treasury updates its guidance.

Last Revised: September 1, 2021

 

[1] Treas. Reg. 31 CFR 35 at 58-59, available at: https://home.treasury.gov/system/files/136/FRF-Interim-Final-Rule.pdf.

[2] Id., at 60.

[3] Id., at 96-97.  

[4] Id., at 97.

[5] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of July 19, 2021) – FAQ #4.4, at 19, available at: https://home.treasury.gov/system/files/136/SLFRPFAQ.pdf.  

[6] Senator Joe Manchin, “Manchin, Collins lead bipartisan push to expand relief funding uses to include local funding matches for federal grants,” available at: https://www.manchin.senate.gov/newsroom/press-releases/manchin-collins-lead-bipartisan-push-to-expand-relief-funding-uses-to-include-local-funding-matches-for-federal-grants.