Can a municipality use ARP funds to provide funds to residents who have applied for, but not received, unemployment benefits?

The U.S. Department of the Treasury (“Treasury”) does not explicitly address a municipality’s ability to provide funds to residents while waiting for unemployment benefits from a state. However, Treasury’s Final Rule, published on January 6, 2022, permits certain contributions to State Unemployment Trust Funds.[1] Further, the Final Rule reiterates “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.”[2]

Notably, the Final Rule states that assistance to households, particularly cash assistance, is an eligible use of funds.[3] Although the “Assistance to Households” eligible use category does not specifically discuss utilizing funds for unemployment while waiting on unemployment benefit payments from a state, it does consider specific types of “cash assistance” to individuals.[4] Several examples of assistance to households identified by Treasury include:

• food assistance;
• rent, mortgage, or utility assistance;
• counseling and legal aid to prevent eviction or homelessness;
• cash assistance (discussed in further detail below);
• emergency assistance for burials, home repairs, weatherization, or other needs;
• internet access or digital literacy assistance; or
• job training to address negative economic or public health impacts experienced due to a worker’s occupation or level of training.[5]

In the examples provided above, Treasury does not list unemployment benefits. However, the cash benefits component is worth considering, as the Final Rule states that cash transfers “must respond to the negative economic impacts of the pandemic on a household or class of households” and that “recipients may presume that low- and moderate-income households (as defined in the Final Rule), as well as households that experienced unemployment, food insecurity, or housing insecurity, experienced a negative economic impact due to the pandemic.”[6]

Last Revised: January 31, 2022