Can municipalities use Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) to fund the full salary of a newly hired grants manager when the grants manager is coordinating use of both American Rescue Plan (“ARP”) and non-ARP funds?

I. Use of CSLFRF to Fund Grants Manager Position

Yes. Payment of a grants manager’s salary that coordinates both ARP and non-ARP programs would likely be an eligible use of CSLFRF funds. A municipality should document the nature of the position and track the expenditure category under which the position falls to assist with the municipality’s reporting and compliance obligations under the ARP. The following three scenarios are illustrative of potential funding methods:

A. Position focused solely on CSLFRF grants management, fully funded by CSLFRF.

In the case of a grants manager position fully dedicated to CSLFRF grant management, the position could likely be fully funded by CSLFRF. The Expenditure Category could be: 1) 7.1 Administrative/Administrative Expenses if the focus of the position is program administration; or 2) 3.4 Public Sector Capacity/Effective Service Delivery if the focus of the position is program implementation/evaluation.

B. Position focused on CSLFRF and non-CSLFRF grant management, partially funded by CSLFRF.

In the case of a grants manager position dedicated to both CSLFRF and non-CSLFRF programs, the position could likely be partially funded by CSLFRF and partially funded from another source (such as administrative costs allowed by other grants), provided appropriate mechanisms and controls are put in place to track time and allocate costs to the appropriate funding source. As with the above scenario, the CSLFRF aspects of the program would fall under Expenditure Category 7.1 or 3.4, depending on the CSLFRF-related focus of the position.

C. Position focused on CSLFRF and non-CSLFRF grants management, fully funded by CSLFRF.

In the case of a grants manager position dedicated to both CSLFRF and non-CSLFRF programs, the position could likely be fully funded by CSLFRF under either the Public Sector Capacity/Effective Service Delivery or Revenue Replacement provisions.  

1. Public Sector Capacity/Effective Service Delivery

If the municipality seeks to use funding to restore staffing to pre-pandemic levels, it may be able to fund the non-CSLFRF related grants management position under Expenditure Category 3.4 Public Sector Capacity/Effective Service Delivery. This provision may provide funding to the municipality to: 1) restore staffing to pre-pandemic levels by hiring staff to fill eliminated or unfilled positions; or 2) add staffing up to a maximum of 7.5% over the pre-pandemic baseline.[1]  

2. Revenue Replacement

If the municipality experienced revenue loss due to the pandemic, it may be able to fund the position under Expenditure Category 6.1 Revenue Replacement/Provision of Government Services, subject to the Final Rule’s restrictions that funding may not be used for extraordinary pension contributions, payment of judgements, or contributions to a rainy day fund.[2] This provision may permit funding to the municipality if the municipality: 1) demonstrates its revenue loss due to the pandemic (as calculated per the Final Rule); or 2) elects to take the standard allowance for revenue loss up to $10 million. Expenditure Category 6.1 Revenue Replacement/Provision of Government services is the most flexible of all CSLFRF funding categories. Therefore, if the position qualifies for funding under a different eligibility category, such as Expenditure Category 3.4 Public Sector Capacity/Effective Service Delivery, the municipality may wish to elect such category and preserve its ability to use Expenditure Category 6.1 to fund other eligible projects.

II. Strategies to Leverage CSLFRF Funding and Address Long-Term Budgetary Impacts

The CSLFRF period of performance expires on December 31, 2026, after which no additional CSLFRF funds may be expended. A municipality may consider implementing the following potential strategies to leverage CSLFRF funding while also minimizing the budgetary impacts of filling long-term positions using CSLFRF funds:

A. Attrition Planning

A municipality could use attrition planning to help mitigate the impact of grant-funded positions on its budget by forecasting the positions that it anticipates may be subject to natural attrition, such as retirements and expected turnover. The municipality could then consider using CSLFRF funds to hire replacements for these employees, prior to the expected natural attrition. Under this strategy, there would be an increase in employees during the grant period of performance, which would adjust to the prior normal levels once the municipality’s expected turnover occurs. This strategy may allow CSLFRF to serve as a temporary solution to immediate staffing needs without creating long-term impacts.

B. Diminished-Based Funding

A municipality could consider using a diminished-based funding strategy to mitigate the impact of the CSLFRF’s sunset provision on its budget. Under this strategy, the municipality could use CSLFRF funds to pay for the full cost of an employee’s salary at the beginning of the period of performance and reduce the grant share as the grant term continues. This strategy may provide a “glidepath” for grant recipients and allow time for the cost of new positions to be integrated into existing budgeting. 

Other municipalities have used this type of diminished-based funding strategy to mitigate the impact of federal grant-funded sunset provisions (i.e., various Department of Justice policing programs) on their budgets.

C. Retention Incentives

Retention incentives are explicitly authorized as eligible uses of CSLFRF in the Final Rule under Expenditure Category 3.4 Public Sector Capacity/Effective Service Delivery.[3] A municipality could therefore consider using CSLFRF funding to fund retention training, including programs to obtain licenses or certifications, along with quarterly or periodic bonuses to assist with long-term workforce stability.

One county developed a similar retention training program for bus drivers. The county examined its workforce and determined that it lacked commercial drivers. The county worked with its local workforce development board and transit authority to fund a commercial driver’s license training program for commercial drivers who would be placed into public sector jobs. This program subsidized training costs and worker salaries for the period of time that the workers attended training. The county also layered on retention bonuses for those commercial drivers that completed the training program, and met certain quarterly or periodic milestones, to encourage retention.

Similar retention training and retention bonus programs have been developed in the school transportation, education, and hospital system sectors.

D. Temporary and Seasonal Employees

A municipality may be able to use CSLFRF funds to pay for temporary employees, as well as seasonal contract employees related to summer youth, prisoner re-entry, and cleanliness projects under Expenditure Category 3.4 Public Sector Capacity/Effective Service Delivery and/or Expenditure Category 6.1 Revenue Replacement/Provision of Government Services, as described in Section I. above.

There may not be a difference in the applicability of CSLFRF to full-time versus temporary/seasonal positions. However, the municipality should review its applicable state and local personnel/civil service laws and labor agreements to determine any potential limitations. For example, a local government’s bargaining unit agreement may prohibit the use of temporary employees entirely or beyond a certain limited term.

III. Compliance Considerations

A municipality should consider implementing a robust compliance infrastructure to help it meet its administration and reporting obligations under the CSLFRF program. As with any federal program, establishment of appropriate internal controls[4] and maintenance of proper documentation is essential preparation for future audits.

Specifically, a municipality should consider implementing a compliance program that addresses the following three areas: 1) strategy and planning; 2) administration and management; and 3) program design and implementation.