Can my municipality use American Rescue Plan funds to pay civil service exam fees for specific populations?

It may be possible for municipalities to use Coronavirus State and Local Fiscal Recovery Funds (“CSLFRF”) established through the American Rescue Plan Act of 2021 (“ARP”) to pay for civil service exam fees for certain populations.

CSLFRF provides a variety of opportunities to help mitigate the negative economic effects of the COVID-19 pandemic.[1] The use of CSLFRF for civil service exam fees for specific populations is not directly addressed within the U.S. Department of the Treasury’s (“Treasury”) Final Rule. However, it is likely that CSLFRF may be used in this regard, assuming certain conditions are met.

A municipality may presume that households that have experienced unemployment have faced negative economic impacts from the COVID-19 pandemic.[2] The Final Rule identifies assistance to unemployed workers as an enumerated eligible use.[3]

Treasury further clarified that eligible costs include:

Assistance to individuals who want and are available for work, including job training, public jobs programs and fairs, support for childcare and transportation to and from a jobsite or interview, incentives for newly employed workers, subsidized employment, grants to hire underserved workers, assistance to unemployed individuals to start small businesses & development of job and workforce training centers.[4]

Based on the above guidance, a municipality may be able to use CSLFRF to reimburse the cost of civil service exam fees for individuals affected by the pandemic as part of a job training or public jobs program, or as an incentive program for newly employed workers through which workers were reimbursed for civil service exam fees.

There is also a possibility of eligibility under the third statutory eligible use category for the provision of government services up to the amount of revenue lost due to the pandemic.[5] If covering the cost of civil service exam fees was part of a previously provided government service by the municipality, then utilizing CSLFRF in this regard may also be eligible.

Treasury states:

Government services generally include any service traditionally provided by a government, including construction of roads and other infrastructure, provision of public safety and other services, and health and educational services. Funds spent under government services are subject to streamlined reporting and compliance requirements.[6]

As an example, if a municipality were to provide educational services as a traditional government function, specifically by structuring a program that assists in covering required civil service exam fees as a condition of public service employment, then there may be some degree of eligibility per the Treasury guidance described above.

Per Treasury’s guidance, this utilization of funds might be considered direct assistance, which “may take the form of loans, grants, in-kind assistance, technical assistance, or other services that respond to the negative economic impacts of the COVID-19 public health emergency.”[7] Treasury further outlines that municipalities must adhere to all applicable local, state, and federal laws and regulations.[8]

Last Updated: July 8, 2022