COVID-19 Federal Assistance e311


Lost Revenue & Revenue Replacement

Funding Source

American Rescue Plan Act

Given that ARP revenue replacement funds should not flow into restricted purpose funds (e.g. pension/reserves), how can cities keep revenue replacement funds separate, when it is not normal practice to categorize revenues into specific expense items?

A municipality can use the Coronavirus State and Local Fiscal Recovery Funds (“CSFRF”/ CLFRF”/ or “Fiscal Recovery Funds”) for the “provision of government services to the extent of the reduction in revenue experienced due to the COVID-19 public health emergency.”[1] Therefore, a municipality must first calculate the revenue loss consistent with the guidelines contained in the American Rescue Plan Act (“ARP”) and the U.S. Treasury Department’s (“Treasury”) Interim Final Rule (“the Rule”). After completing this step, a municipality must track the CLFRF expenditures used for the “provision of government services to the extent of the reduction in revenue experienced.”[2]

Many municipalities use their financial management system tools for tracking and management purposes, such as a chart of accounts and/or a project/grants module. For example, many municipalities have a separate Fund Number to signify a Grant Fund, use a separate Appropriation Number to distinguish the individual award (i.e., Fiscal Recovery Funds in this case), and use another segment of the chart of accounts to track the CLFRF eligibility categories (i.e., provision of government services to the extent of the reduction in revenue experienced in this case). By using these practices, a municipality would not associate this account string with replenishing financial reserves or pension deposits.

The Rule also adopts a definition of “General Revenue” as a means to identify revenue sources that can be used to calculate revenue loss. Treasury names the Census Bureau’s Annual Survey of Local Government Finances as a source of additional context for municipalities to determine which funds can be included in the calculation of revenue loss.[3] In addition to excluding reserve/pension funds, Treasury also excluded: (i) refunds and other correcting transactions; (ii) proceeds from issuance of debt or the sale of investments; (iii) agency or private trust transactions; (iv) revenue generated by utilities and insurance trusts; and (v) intergovernmental transfers from the federal government, including federal transfers made via a state to a locality pursuant to the Coronavirus Relief Fund (“CRF”) or the Fiscal Recovery Funds.[4] Municipalities should be consistent in calculating revenue loss, and include the same specific funding sources for the duration of the covered period that extends through December 2024.

Regarding pension deposits, Treasury interprets “deposit” as an “extraordinary payment into a pension fund for the purpose of reducing an accrued and unfunded liability.”[5] This type of payment is distinct from a “payroll contribution”; therefore, in general, “if an employee’s wages and salaries are an eligible use of Fiscal Recovery Funds, recipients may treat the employee’s covered benefits as an eligible use of Fiscal Recovery Funds.”[6]

Last Updated: June 22, 2021

[1] Treas. Reg. 35 CFR 31 at 51-52, available at:

[2] Id.

[3] Id at 54.

[4] Coronavirus State and Local Fiscal Recovery Funds, Frequently Asked Questions (as of June 17, 2021) – FAQ #3.1, at 12, available at

[5] Id. at 27.

[6] Id.